I only earned like 2k in the other state, and all remaining income in my home state. Does my 401K withdrawl count as income in BOTH states and taxable in both states?
The withdrawal will be taxable in your resident state, not in the nonresident state.
As @DoninGA stated, a distribution from a 401K is taxable only by your state of residence at the time you receive the distribution. The state in which the 401K contributions were made is irrelevant.
The withdrawal will be taxable in your resident state, not in the nonresident state.
I think the answer is more of a "maybe" than a "no." But you need to review the requirements for reporting income by the non-resident state.
In general, income you receive while living or working in state #2 can be taxed by state #2, while all your world-wide income is taxed in your home state. If the 401k withdrawal was made while you were physically living on working in state #2, state #2 might want to try and tax it. It depends on the laws of state #2. (If the withdrawal occurred while you were physically living or working in your home state, it is definitely not taxable by state #2.)
Timing may also matter. It may make a difference if you were in state #2 for two weeks or 9 months, for example. You need to look at the laws for state #2.
@fishingpole81 you will not be taxed by both states. The residential state will give you a credit for tax liabilities of the non-residential state in any event.
The credit is typically the lower of a) what your tax liability was in the non-residential state or b) what the tax would have been if it was taxed in your residential state.
As @DoninGA stated, a distribution from a 401K is taxable only by your state of residence at the time you receive the distribution. The state in which the 401K contributions were made is irrelevant.