It would not be state income in both states. It would be state income for the state in which you were residing when the money was actually paid, which does not necessarily reflect how it was used.
The tax concept is called domicile. Your domicile is your permanent residence. It is your main home, it is the place where you have the most allegiance, the most connections. A taxpayer can only have one domicile at a time no matter how many homes they own. There is no single factor that determines domicile it depends on a combination of facts and circumstances. Some of the factors include where your doctor interest are located, your children’s school, your significant social interests such as clubs, other significant personal and financial relationships.
A person might change houses without changing their domicile, even someone on a long-term assignment in a different state who maintained a presence in their original state and intended to return, would be domiciled in their original state even if the temporary assignment was lengthy. Changing your domicile requires not only that you physically move, but that you take affirmative steps to end you’re dumb sale in one place and begin it in another, such as changing doctors, re-registering to vote, getting a new drivers license, and so on.
So now the basic principle is simple. If you were domiciled in Florida when the funds were paid, then it is Florida income, no matter how the funds were used. If you were domiciled in Arizona when the funds were paid, then they are Arizona taxable income, no matter how they were used.
