Did you itemize deductions in 2024 or take the standard deduction on your Federal 1040 tax return? If you took the standard deduction, then nothing will be taxable on either a Virginia refund or rebate. Even if you itemized deductions last year, it is still possible that your Virginia rebate and refund will not be taxable. Because the state and local income tax deduction for itemizing was capped at $10,000 in 2024, your refund and rebate won't be taxed in 2025 as long as subtracting those two amounts from the total state and local tax paid last does not reduce your itemizing deduction below $10,000.
For example, if you itemized in 2024 and had $11,000 of state and local taxes (including property tax), you would have only been able to claim $10,000 (because of the cap). If the total of your Virginia 2024 rebate and refund is under $1,000 (the difference between the $11,000 of tax you could claim vs. the $10,000 you were able to claim), you will not be taxed on any of this on your Federal 1040. Any amounts over the rebate + refund that exceeds $1,000 will be taxable income on your Federal 1040.
If TurboTax is still causing issues for you on this topic, please reply back with more detail on what Smart Check is saying "isn't".
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