Taxpayers who itemize their deductions on their federal income tax returns and receive a state tax refund must include the refund in income only if they deducted the state tax paid. Because of the $10,000 limit on itemized deductions for state income and property taxes, some itemizers are not able to deduct all of the state taxes they paid and do not need to include a refund in income.
This is coming from : https://www.irs.gov/newsroom/irs-issues-guidance-on-state-tax-payments#:~:text=Most%20taxpayers%20re....
I believe that the software calculates what would have been allowed for deduction if the taxpayer would have itemized or did itemize so the number is correct.
Katherine S 63
