No...that is correct. This has been worked out extensively, and fairly, many years ago..
1) You prepare the NC non-resident tax return first for the tax on just your wages, and NC keeps whatever part of your NC withholding they calculate they want. (assuming your withholding overpaid what NC requires...sometimes you have to pay a bit more)
2) THEN you prepare the SC Resident ax return. SC uses ALL your income from all sources, Wages, Interest, dividends...everything, and calculates the tax on all of it. BUT, to avoid double-taxation, SC uses the "Credit for taxes paid to another state" to reduce the tax. So whatever NC kept on their tax forms, goes in as a credit on the SC tax forms. AND...if the SC tax would have been a bit higher on the same income, SC just collects the excess over what NC charged. (But also remember that SC taxes all your income form everywhere...NC can only tax your wages there in your situation)
This process is the same for every state that has an income tax...with exceptions for some states that have reciprocal tax agreements with a neighboring state....and a couple like CA-OR-AZ-IN that reverse the process.
Also, take an example where a person in SC takes a summer job in TX or TN, where there is no state income tax. SC taxes all that TX or TN income, and there is no credit for taxes paid to the "other" state, since there weren't any paid.
____________*Answers are correct to the best of my knowledge when posted, but should not be considered to be legal or official tax advice.*
