I live in NYC but work in CT and am therefore subject to state taxes in both. I pay 1) NY state tax 2) NYC city tax and 3) CT state tax.
My question is twofold: 1) Is it the case I can just apply my CT state tax as a credit against my NY state tax? Given NY is always higher, if, for example, I owe $15 in NY and $10 in CT, I would just owe $5 to NY?
and 2) Is there a way to change my withholding with my employer so as to avoid my current massive withholding percentages (ie my withholdings are for all three taxes described above). My employer has others in my same situation, so I have reached out to HR as well.
Q: "Is it the case I can just apply my CT state tax as a credit against my NY state tax?"
A: Yes. You may claim a credit on your NY state tax return for taxes paid to CT on the income that is taxed by both.
With regard to withholding, assuming your Connecticut employer is not incorporated or licensed under New York state law and does not maintain an office in New York, as an out-of-state employer it is not required to withhold New York state income taxes for its New York resident employees.
Ahh yes, that’s the one other caveat. My employer does, in fact, have offices in NYC.
with that information now included - is there any way for me to modify my withholdings so as to avoid the double taxation? Or is my only option to file for the refund in my return at end of year
Unfortunately, New York does not permit you to exempt yourself from withholding unless:
1. You had no New York income tax liability in the prior year, and
2. You expect none in the current year, and
3. You are over 65 years of age, under 18, or a full-time student under 25.
(You may also claim exemption from withholding if you are a military spouse and meet the conditions set forth under the MSRRA and VBTA.)