Unfortunately, a state tax refund is always income if you itemized your deductions to be reported on your federal tax return.
However, the taxable income is reduced by the federal tax benefit you received.
For more information on what is taxable income, follow this link:
https://turbotax.intuit.com/tax-tips/irs-tax-return/taxable-income-vs-nontaxable-income-what-you-sho...
[Edit 3/2/2019 8:08 AM SPT]
