You can still itemize because your state refund will only be taxable if all three of the following are true:
- You itemized deductions last year, instead of taking the standard deduction
- You claimed state and local income taxes (not general sales taxes)
- Claiming the deduction helped you increase your federal refund or lower your tax bill
Even when your refund is taxable, it may not be the entire amount. It depends on how much the deduction affected your refund or tax bill. Next year you will answer a few simple questions about the refund, and TurboTax will calculate the taxable amount for you.
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