Not necessarily.
You have to pay tax to the state that you live in as well as the state that you work in. Usually, the state that you live in (your resident state) will give you a credit for the taxes that you paid to the state that you work in (nonresident state). This is true for Connecticut.
However, the credit is generally limited to the smaller of:
- the taxes you paid to the nonresident state or
- the taxes you would have paid to the resident state on that same income
If your resident state has a higher tax rate, your Other State Income Tax Credit will not cover the full amount tax that you owe to your resident state.
For example:
- Nonresident state tax = $1,700
- Resident state tax = $2,000
- Other state tax credit = $1,700 (smaller of tax paid to each state)
- Balance due to resident state = $300
In this example, if you had tax withheld for your resident state, you wouldn't get it all back because you still have a liability there.
If your tax rate in Connecticut is higher than your tax rate in New York, you would not get all of your withholding back. This could happen if you have other income that is not taxable in CT which could put you in a higher tax bracket in CT than you paid on just your wages to NY.
