How would a married couple living together but working in separate states file returns?

It depends.  Even though the state filing situation is a little complicated, you may still file Married Filing Joint for the Federal return.  Your Federal return is not affected by your residency/work situation.  As far as the state returns are concerned, you are filing a North Carolina resident return regardless if you decide to file either as Married Filing Joint or Separate.  The husband will also file:

• Virginia nonresident return, married filing separate.  Virginia law requires this filing status because of your residency status no matter how you file the Federal return.  Please click on this link for more information:  https://www.tax.virginia.gov/filing-status

• Connecticut nonresident return, can be separate or joint.  Please see this link for more information:  Joint filers with different residency status for Connecticut - CT.gov.  If you choose to file joint in CT, you will need to make an election to do so.  (Since VA is already separate, it may be easier to file CT separately also, but is your option).

North Carolina will tax all of your income regardless of where it is earned.  However, they will give a credit to you for the taxes that must be paid to VA and CT for income earned in those states.  For this reason, prepare the nonresident returns first so that TurboTax may correctly calculate the credits.

Here is an FAQ that provides information on how you can prepare a state return Married Filing Separately when you are filing a joint Federal Return:  https://ttlc.intuit.com/replies/3301995