I live in Phoenix, Arizona. I am a resident alien for tax purposes (entered US 1998). I got married end of Nov 2009 and my wife didn't enter US all of 2009 (entered 1st time, March 2010).

We filed MFJ with 1st-year choice option for Federal taxes.

How about Arizona taxes? Will Arizona let me file MFJ and claim (Standard deduction+Personal exemption) for my spouse as well?

As I understand, MFJ is only possible with 140NR since my wife was a nonresident alien all of 2009. However, the tax ruling ITR 95-2 says that exemptions are to be apportioned as if both husband & wife were non-residents. Not sure what this really means?

Am I better off filing MFS? (Unless MFJ is a choice and I get to deduct more)

Thanks.

Yes, you can and should file MFJ on the Arizona return, because Arizona, like the U.S. does NOT require the spouse be physically located in Arizona in order to claim her.

The Arizona return DOES require that she have an ITIN or SSN, so you may have to wait to get her iTIN before filing the Arizona return.