@rvierling09 - I have received a response for your situation from SuperUser
@rjs which is along the line that confirmed what I thought needed to be done to properly report the taxable portion of both state tax refunds.
Here is their response -
"TurboTax is not set up to handle your situation correctly. The right way to do it is to calculate the taxable portion of your own refund using information from your 2015 single return, and calculate the taxable portion of your husband's refund using information from his 2015 single return. But TurboTax is set up to only do one such calculation, using information from only one 2015 return. Here are two options for handling it.
1. Treat both of your refunds as fully taxable. That's the most common result anyway when you both itemized for 2015. If you choose to do this, you can enter the two refunds separately, or enter the total of both refunds as if it were one refund. Since you transferred information from your 2015 return, you will get a screen that says "Confirm Your 2015 Federal Return Info." It displays information that was transferred from your 2015 return and asks you if it's correct. Answer No, that it's not correct. Two screens later you will get the choice to either enter information from your 2015 return or make your full refund taxable. Choose the option to make the full amount taxable.
2. Do the calculations of the taxable amount yourself outside of TurboTax. You have to do the calculations separately for each of the two refunds. You can probably use the worksheet for Form 1040 line 10 that's on page 24 of the IRS instructions for Form 1040, but check the "exceptions" listed in the instructions on pages 23 and 24 to see if you have to use Worksheet 2 on page 25 of Publication 525 instead. Add together the taxable amounts from the two calculations, and enter that total as the refund amount in TurboTax. Then follow the instructions in option 1 above to treat the full amount as taxable."
The Form 1040 instructions from entering state/local tax refunds start on page 23 of the instructions with the worksheet on page 24 - <a rel="nofollow" target="_blank" href="
https://www.irs.gov/pub/irs-pdf/i1040gi.pdf#page=23">https://www.irs.gov/pub/irs-pdf/i1040gi.pdf#pag...>