ISSUE:Who is an Arizona resident for Arizona income tax purposes? APPLICABLE LAW:Arizona Revised Statutes (A.R.S.) § 43-102 provides that it is the intent of the Legislature to impose on each resident of Arizona a tax measured by taxable income wherever derived and to impose on each nonresident a tax measured by taxable income which is the result of activity within or derived from sources within this state. A.R.S. § 43-104 defines the terms "resident" and "nonresident" for income tax purposes. The term "resident" includes: (a) Every individual who is in Arizona for other than a temporary or transitory purpose. (b) Every individual domiciled in Arizona who is outside Arizona for a temporary or transitory purpose. Any individual who is a resident of Arizona continues to be a resident even though temporarily absent from Arizona. (c) Every individual who spends, in the aggregate, more than nine months of the taxable year within Arizona is presumed to be a resident. The presumption may be overcome by competent evidence that the individual is in the state for a temporary or transitory purpose
If, under this Arizona revenue procedure, you are deemed to be a resident, then you must file taxes in Arizona
And if you must file in Arizona, your pension will be taxed
The following is from the Q & A on Arizona's website, at http://www.azdor.gov/About/FAQs/MovingtoAZ.aspx
So, as you can see, your case turns on whether you can claim that you are only in Arizona for a "temporary or transitory purpose."
If you were a resident of another state that had income taxes, that would be a case where you would get a credit from your resident state for any taxes due from the non-resident state ... but in this scenario, in my experience, Arizona will argue that you are effectively a resident.
I will now attach the entire revenue ruling on with your case turns, for your review:
If you have further questions, let me know