Whichever state is your resident state is going to tax all income from all sources there will not be any allocation. Therefore on that state return both of your incomes will be reported.
Since one of you has income from another (non-resident) state, that state will also tax the income earned there. When completing the non-resident state be sure to exclude the income that was not earned in that state.
Your resident state in most cases will give you the opportunity to claim a credit for the taxes paid to another state to mitigate the double taxation.
Complete the non-resident state interview first in order to get the amount of income taxed there and the amount of taxes actually paid there (not necessarily the same as withholding). You will use those numbers to complete the resident return. You will look for the credit section to find the "Credit for Taxes Paid to Another State" topic.
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