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How do I claim the credit paid to the other state?
You must complete your nonresident state tax return first, then look for the credit for taxes paid to another jurisdiction to get the credit.
What if it isn't there? There is a credit showing on IT-196 but it's not the same number as the amount on my W2.
It would seem unusual that NY would tax residents at a lower rate than other states do, but you will only get credit for taxes paid to other states up to the amount that NY would have charged.
Pension funds and other retirement funds are different I have been told that you are taxed in the state of residency
Yes, you are generally taxed on all income earned while you are resident of that state, regardless of where you go to work.
You will likely also be taxed in the state in which you worked, but you will receive a credit on your home state return, for taxes paid to the other state.
Here is a link to the NY Department of Revenue for more details: New York Department of Revenue
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