"Is it required to deduct"
Maybe. There are some circumstances where failing to take a tax deduction will cause you to have increased taxable income that may result in other benefits to you. (Such as having higher income to qualify for a mortgage.) In that case, failing to take a legal tax deduction that is open to you may be considered fraud.
"because then if I receive it as refund next year I will have to pay income tax on it"
This is very fuzzy thinking. Suppose you pay $5000 in state taxes, and take the deduction. You will save about $1100 this year on your federal taxes. Then next year you get a $1000 refund that must be reported as taxable income. You will pay $220 in higher income taxes next year. You are still $880 ahead. Why would you not want to take the deduction?
