I filed 1040NR for previous year (2018) and deducted $10000 for state income tax (withhold amount is slightly over $10000, assume it's $10500). Since I was an non-resident alien, I can only claim itemized deduction, although standard deduction would be higher. I will file 1040 this year.
I got a refund (assume it's $2500) from California, and entered the value from form 1099-G in turbotax. I also selected that I used itemized deduction and some values from my 1040NR. Then it told me the refund is not taxable.
After reading this answer (https://ttlc.intuit.com/community/taxes/discussion/don-t-believe-determination-that-my-state-tax-ref...) and the "State and Local Income Tax Refund Worksheet" in 1040 instructions, I believe after subtracting the $2500 from $10500, it would be $8000, so I have to pay tax on some of the refund ($10000-$8000=$2000).
I can manually choose in TurboTax that the refund is fully taxable, but I would have to pay more tax than necessary. Is my understanding correct?
