My wife and I are both residents of AZ, why is TurboTax wanting me to select if my wife is a nonresident? I’m getting confused on what to do for this.

It's possible there's an entry in the federal portion of TurboTax that's generating this question.  You need to check your spouse's personal and W-2 information in that section of the program.

To if this is the case in TurboTax Online: 

1. Open TurboTax Online
2. Select  Tax Home in the left pane
3. Select the dropdown to the right of Personal Info
4. Select  Continue, Pick up where you left off or Review/Edit
5. On the Personal profile screen, under Your household, select the dropdown to the right of your spouse's name
6. Select Edit
7. Scroll through your spouse's screens until you get to the Tell us a bit more about [your spouse] screen
8. Verify her state of residence, near the top.  If incorrect, make any changes necessary, then select Continue
9. Select Continue on the Personal profile screen
10. Next, when the Great! We've got your income info screen generates, select Add/Edit to the right of your spouse's W-2, if she has one
11. Select the dropdown to the right of her W-2
12. Select Edit
13. On the OK, let's update the info we have for you and your employer screen, select Continue
14. On the Now let's update the rest screen, scroll down and verify the state entered under State taxes and Local taxes.  They should be the same as displayed on her Form W-2.  If what's on the W-2 is different than your state of residence, this is why the program might think your wife had a different residence.  If you've simply input the state incorrectly in TurboTax, make the correction(s), and select Continue 

If the TurboTax Online navigation suggested above doesn't look like what you're seeing, see the TurboTax Help article Why does the TurboTax navigation menu look different for me?.