Yes. Let's start with your 2019 state tax refund. Your state tax refund should not be taxable unless you itemized deductions in 2019 and you took a state income tax deduction. This is normally state taxes withheld from your W-2. Since the State and Local tax deduction is limited to $10,000 on your itemized deduction, a proportional share of your state taxes could be limited if the total deduction of your 2019 state and local taxes was greater than $10,000. If this was the case, you did not gain full deductibility of your state income taxes so the full amount of your state tax refund would not be included in your 2020 tax return as income.
Review your 2019, Sch A, State and Local taxes section to determine if your total state taxes were greater than $10,000.
The pandemic has affected your taxes in many ways. Including reporting in TurboTax the amount of stimulus money you received. Click Here for more information on how the Pandemic affected your 2020 taxes.
