You withhold state income taxes to satisfy your state's payment requirements, not to get yourself under the $10,000 limit for federal itemized deduction purposes. Maybe you could have limited withholding so as to not "waste" the extra dollars for federal itemization purposes. But, maybe, that would have made you "underpaid" for state purposes and therefore incur underpayment penalties. You have to steer a course between $10,000 for federal purposes and being underpaid for state purposes, if you can. And, maybe, you can't.
