The first key is to determine what are the filing-status and residency laws for each state. In this case both Arizona and Illinois follow similar treatments (which will make your situation much easier, as you will see).
Since you yourself are a part-year resident of Illinois and a part-year resident of Arizona, while your wife is a full-year resident of Illinois only, Illinois allows you to file as married filing separately in your situation, and Arizona allows the same treatment. (Please note that Arizona is a community-property state. However, because Illinois is not a community property state, you will not have to deal with community-property rules until she joins you in Arizona).
Because of this, your wife will file an Illinois full-year resident return, using the status of Married Filing Separately. You will file an Illinois Part-Year Resident return using the status of Married Filing Separate, and then an Arizona Part-Year Resident Return, also using the status of Married Filing Separately. Although this sounds complex, it is actually easier than trying to file joint returns, particularly for Illinois, which you can choose to do. But in this case, Illinois will consider you to be a full-year resident, meaning your Arizona income is also taxable in Illinois, and then you are claiming tax credits on the return from both Arizona and California. That treatment would probably result in more tax in your case, and will not be less tax.
What about California? California and Arizona have a reverse credit agreement. It's sort of a reciprocal arrangement. In this arrangement, an Arizona resident who works in California is responsible for tax in both states. In a standard two-state arrangement (like what exists between Illinois and Indiana, for example), the nonresident state taxes all income worked in that state, and the resident state does as well. However, the resident state gives a credit for tax paid to the nonresident state. The reverse credit arrangement works in reverse. The resident state taxes first, and then the nonresident state will give a credit for the taxes you pay to the resident state.
So you will want to prepare your returns in this order:
- Illinois part-year resident return
- Arizona part-year resident return
- California nonresident return.
Usually the nonresident return is completed first. But because of the reverse credit, this year the resident returns should be completed first.
To prepare the separate spousal state returns, even if you are filing a joint federal return, desktop software is better. Here is a Help article that can provide you with additional instructions: How do I prepare a joint federal return and separate state returns?
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