So, since you itemized deductions (including state tax paid), if you then get some of that state tax refunded, you migh need to claim some of that state tax refund as income.
It was always a bit difficult to understand and the SALT (State And Local Tax) limit made it even more complicated.
If your state tax deduction was limited to 10,000, what was the reduction?
In other words, if you paid 12000 in state tax, which was limited to 10,000, then the refund up to 2,000 would not be taxable.
ADDITIONALLY if you itemized and claim all the state tax (so the SALT limit is not relevant) then you have to look at the standard Deduction.
In other words, if you itemized 26,000 and got a 400 refund, but you could have taken the standard deduction of 25,900 so only 300 is taxable.
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