First of all, what state tax is withheld does not determine in which state that income is taxable. If you are a full time resident of Arizona, all of your retirement income is Arizona income, taxable by them and not taxable by Wisconsin. As an Arizona resident, all of your income is taxable by Arizona, regardless of where you earned it. So, the income from your rental in Wisconsin is taxable by Arizona. As a Wisonsin non-resident, your income earned there is taxable by them. In order to prevent double taxation, your resident state of Arizona will issue you a credit for tax paid to other states. To enter this in TurboTax correctly, you should prepare your non-resident Wisconsin return first, and then complete your Arizona return. There will be pages in your Wisconsin return where you allocate your income. Only allocate income earned in Wisconsin to Wisconsin, and that does not include pension income.
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