I am currently working in CT and living in NY. Would i be losing more money because i would be owing taxes to both the states? As opposed to living and working in the same state?
you are not double taxed....
you'll complete the CT tax return first.
whatever is the LIABILITY to CT becomes a credit on the NY return, so you are not paying taxes on the same dollar twice
That is correct. The state you live in will credit you for the tax withheld for the state you work in. When you prepare your two state returns, make sure you prepare the non-resident state return first, then the return for the state you live in. Of course, you do have to pay for two state software programs instead of only one.
while its true that NY gives credit for taxes paid in CT the computations for the credit are complicated and you may not get the NY credit for the full amount of tax paid to CT. however, there are other things to consider such as cost of living in one state while working in another. and other personal factors, salary ranges for the same type of work in both states.
there are 7 states that have no state income tax and two that only tax dividends interest and the like
However, it is still a question of what you are left with after paying all your expenses including taxes and personal factors, such as the weather.
there is a way to check. look at your tax liability for CT and compare it to the credit on the NY return form IT-112-R part 3 line 34. . if this is smaller than the CT tax you are not getting a credit for the full amount paid to CT,
It's true that you won't be double-taxed, but it can definitely cost you to work in a different state, if the other state has higher tax rates. For example if you owe the work state $5,000 and the home state $4,000 (on the same income), you'll be able to take a credit of $4,000 on the home state return, but you'll still owe $5,000 to the work state. Whereas if you lived and worked in the home state, you'd only owe the $4,000. Net loss: $1,000.
The credit doesn't change what you owe to the work state.