If you didn't Itemize Deductions in the prior year, your State Tax Refund is not taxable. It's only taxable when you used it as a Deduction in the prior year. When you enter the amount of your State Refund, TurboTax asks questions to determine the taxability.
Here's more info on Is My State Refund Taxable?
For a Home Sale that was your main residence, there is a Home Sale Exclusion that applies. If your home was also a Rental Property, different rules apply.
Here's more info on What to Do if You Get an IRS Notice.
If you received a letter from the IRS, you should reach out to the contact phone number in the letter.
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