were you married in 2018 and used the Married Filing Separate tax status -then one itemizing and one taking a standard deduction is a no-no. the law is both must use the same method.
assuming you got married in 2019 then her refund may be taxable. don't enter your refund because since you took the standard deduction (again assuming marriage in 2019) it is not taxable. see PUB 525 and carefully read the instructions and footnotes for each line that has them if her total tax deduction for 2019 was limited due to the cap.
For an individual who paid no more than $10,000 of state and local taxes (income or sales) during 2018, a taxable state tax refund of the year 2019 is the smaller of:
1) The refund amount (normally shown on 2019 Form 1099-G).
2) The excess of itemized deductions over the standard deduction for 2018.
3) The excess of state and local taxes actually deducted during 2018 over the sales taxes that could have been deducted during 2018.
4) if she paid the alternative minimum tax then the answer is more complex because of the way the tax deduction is treated for AMT purposes. The way we handle state income tax refunds was to go back to the prior year and reduce the amount of state income taxes by the refund. then we would see if the total income taxes (regular tax + amt tax) changed. if not that means the state tax deduction produced no tax benefit so the refund was not taxable. if there was a change we worked back and forth on the amount used for state income taxes to arrive at a result that produced no change in the income taxes. the excess of the original state income tax amount over the revised state income tax amount was the amount that produced a tax benefit.
even when there is no AMT issue because of the limitation in 2018 of the deduction for state taxes a refund pf state income taxes could produce no tax benefit and thus not be taxable. example taxpayer pays $8000 in real estate taxes and $5,000 in state income taxes. total taxes for schedule A $13,000 limit on deduction is $10,000. in 2019 got a refund of $1,500 in state income taxes. , that refund produced no tax benefit because had only the net amount had been deducted ($3500 = $5000 less $1500 refund) the deduction would still be limited to $10,000 so there was no benefit from the $1500 refund.
