Your state tax refund is taxable for the amount that is included as an itemized deduction on your federal return. So, if you have $15,000 in state taxes withheld and you get $1,000 back, it would not be taxable.
However, if you have $8,000 in state taxes included in your itemized deductions and you get $1,000 back, you would have to include that $1,000 on your return for next year.
Which state are you in? In general, you do not get a deduction on your state return for taxes paid to the state, although all states have different rules.
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