My divorce was final in Feb. 2017. How do we handle the state refund we received while filing jointly for the 2016 tax year?

My divorce was final in Feb. 2017 and we filled jointly for the 2016 tax year. We got a state tax refund for 2016 and split the funds equally. How do we report that on our 2017 return? Do we each report half of the state return as income on the 2017 Federal return?

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Yes, you are exactly correct. Each of you should report half the refund amount. If you did not itemize your deductions on that 2016 return, or you itemized and chose to take the state sales deduction instead of state income tax, the refund you received in 2017 will not be taxable to you.