@vijay-saikrishna TurboTax is asking the questions ( like whether you used standard deduction or itemized deduction ) to compute if and how much of the State refund should be taxed. This has been around for ages. If you used standard deduction then none of the refund is taxable for federal purposes. If you used itemized deduction then it uses "sales tax " for your AGI or the actual SALT you sued to see how much of the refund should be taxable. e.g. if you used State tax of 8000 for your federal return in 2023 and now got back 1000 as State refund then TurboTax will compute both ways ( SALT and Sales Tax choices ) for taxation of the refund. That is the theory behind this ---
Is there more I can do for you ?
