The federal return recommends I take the standard deduction. In AZ, the state medical expenses are deductible if I itemize, but then I lose the standard deduction?

[xmasbaby0]

No you will not lose your federal standard deduction if you enter your medical expenses.  They just will not have any effect on your federal tax due or refund.   Itemized deductions flow to the state return so if your  state allows the deduction -- go ahead and enter the medical expenses.

To enter your medical expenses go to Federal>Deductions and Credits>Medical>Medical Expenses

 Many people will not have enough itemized deductions this year to itemize, and will just be getting their new higher standard deduction.  The thing is, though, that some of those deductions could make a difference on a state return even if they do not affect your federal return.  Information flows from your federal return to your state return, so it might not be a bad idea to go ahead and enter them anyhow.  It cannot hurt you.

The following states allow you to itemize deductions on just the state return: Alabama, Arizona, Arkansas, California, Delaware, Hawaii, Idaho, Iowa, Kentucky, Minnesota, Mississippi, Montana, New York, North Carolina, Oregon, and Wisconsin, 

[DawnC]

As with federal income tax returns, the state of Arizona offers various credits to taxpayers. An individual may claim itemized deductions on an Arizona return even if taking a standard deduction on a federal return.  For the most part, an individual may claim those deductions allowable as itemized deductions under the Internal Revenue Code.  If claiming Arizona itemized deductions, individuals must complete and include Federal Form 1040, Schedule A, and, if applicable, an Arizona Schedule A with an Arizona return.

Enter all your itemized deductions on the federal return.   TurboTax will transfer them to your state return (even if you are taking the standard deduction on the federal return).   If on the Arizona return, your itemized deductions are greater than the AZ standard deduction, TurboTax will recommend and allow you to choose to itemize on the state return only.   

On both, the federal return and the AZ return, you can choose either the standard deduction or your itemized deductions, never both.