Why does my 2018 MD state tax refund (I live in DE, work in MD) count as wages/income on my 2019 federal tax return?

[HelenC12]

If all three of the following are true, your refund counts as taxable income:

• 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. Just answer a few simple questions about last year’s refund, and we’ll calculate the taxable amount for you.

Related Information:

• Where do I enter a 1099-G for a state or local tax refund?
• Did I itemize last year?
• How do I report last year's state or local refund without a 1099-G?
• Which deduction should I choose, state and local income tax or sales tax?
• Where do I find last year's state/local refund so I can report it on this year's taxes?

Source: TurboTax FAQ