What dose allocate federal adjustment income mean?

[JaimeG]

If your spouse lived and/or worked in a state other than the state you're asking the question about, TurboTax is trying to "back-out" your spouse's income from that state.  There could be many different reasons why you would want to back out your spouses income, but below is one.

For example: 

Let's say you and your wife both lived in Arizona and you both had W-2s from working in Arizona.  But you also had part of your income allocated to California because your company sent you there for two months to work on a special project.  When you go to file the California return, California takes your total Federal Income amounts and then backs out income that should not be taxable to California.  So in this example, you'd want back out your wife's income so that it was not taxed by the State of California.