For tax years 2021 and forward AZ does not tax military retirement pay at all (Click here for AZ DOR reference) . Assuming you and your spouse each received a form 1099R for military retirement, the entire taxable amount on those forms will be excluded from AZ taxable income.
When you enter each form 1099-R for the military retirement pay in the federal "Wages and Income" section, you will arrive at a follow on question "Where is your distribution from?" You should select "Retired or retainer pay of the Uniformed services of the US." On the next page you should select "non-qualified plan" since it is military retirement.
This will automatically exclude all of the military retirement pay on that 1099R from AZ taxable income.
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