You should use the itemized deductions if they are more than your standard deduction.
Your "huge" state tax refund will almost certainly not all be taxable next year. The calculation of how much of the refund is taxable is complicated and hard to explain. It takes into consideration the fact that you could have taken the standard deduction. It also takes into consideration the $10,000 cap on the deduction for state and local taxes. The basic principle is that the amount that will be taxable next year is only the amount for which you actually get a tax benefit this year. The bottom line is that you won't lose anything by taking the itemized deductions this year. At worst, it will end up the same, but you'll pay the additional tax next year instead of this year.
