This is an "Other Subtraction Adjustment" on the Arizona form.
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Start and Continue through your Arizona Resident or Part-Year Resident Return until you reach the screen "Any Other Subtraction Adjustments?" Say Yes.
- Enter the description of your subtraction and the amount, then Continue.
From the instructions for Arizona Form 140PY:
"A. Exclusion for U.S. Government, Arizona State, or
Local Government Pensions
If you receive pension income from any of the sources listed
below, subtract the amount you received or $2,500, whichever
is less. Include only the amount you reported as income on
your federal return and included on line 23 in the ARIZONA
column. If both you and your spouse receive such pension
income, each spouse may subtract the amount received or
$2,500, whichever is less."
A link to the Instructions is here: https://www.azdor.gov/Portals/0/ADOR-forms/TY2017/INDIV-F/FORMS_INDIVIDUAL_2017_140PY_Booklet.pdf
