| Do I have to pay taxes on income I earned outside Arizona State?
Arizona State Tax law taxes Arizona residents on the same income that they report for federal income tax purposes, subject only to the specific modifications allowed under Arizona tax law. Thus, a taxpayer you would be taxed on income earned in both Arizona and the other state. However, "Arizona State would provide the taxpayer with a tax credit for taxes paid to another state, provided the taxpayer filed a tax return with another state."
In essence, this means is that Arizona State taxes its residents on the income reported on the Federal Form 1040 (Income earned from all the States) but would provide a Tax Credit that is equivalent to the taxes paid by the Arizona resident to the other State.
There is no double taxation to the resident. This tax treatment is very similar to that used by other states such as New Jersey.
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