In the past, TurboTax would ask me automatically to go back to prior tax year's TurboTax software to figure out taxable amount of my state tax refund due to AMT reason. In order to figure out taxable amount, I had to reduce my state refund gradually until AMT kicks in becoming non-zero. Then the remaining state refund is the non-taxable amount for this year because it wouldn't differ the tax liability in the previous year.
Somehow TurboTax software stops this step since several years ago. All the state tax refunds become FULLY TAXABLE whenever itemized deduction is done in the previous year. This doesn't make sense to me at all because the non-taxable amount subject to AMT in the previous year is taxed again this year.
