@TomD8
Yes, I agree that that does apply to the OP's situation. But it does not completely solve the double taxation problem, since he must file as a resident in both states.
Note that the AZ Form 309 instructions say "The credit is allowed only for taxes imposed on income that would have been sourced to the other state if the Arizona resident had filed as a nonresident to the other state." That means the income that he earns for working in New Mexico. But since he has to file as a resident of both states, the credit would not apply to any other income that would not be sourced to New Mexico if he were a nonresident, such as investment income. Any such income would still be taxed by both states, possibly with no compensating credit.
The situation is further complicated by the fact that his wife also works, but she is a resident of only Arizona, not New Mexico. Since I'm not familiar with the tax laws of either state, I'm not going to try to figure out how that would be handled. I still think that @Dan Oliver needs to consult with a local tax professional before deciding whether to proceed with his plan.
