I did not use this deduction last year but there is no option to select "did not take this deduction." So how do I get around this question?
That is probably for the 1099G state refund entry. Did you take the Standard Deduction on your 2022 federal return? Or itemize on Schedule A? If you itemized you either took the state income tax deduction or the sales tax deduction. Had to be one of those.
A State Tax Refund is taxable if you itemized deductions on that prior year's federal return and took a deduction for state income taxes instead of the sale tax. You got a deduction benefit for it so now you have to include it as income. If you took the standard deduction it is not taxable and you don't need to report it.
Can you clarify which section you are seeing these options? Are you entering a 1099-G or are you in a state interview section?
That is probably for the 1099G state refund entry. Did you take the Standard Deduction on your 2022 federal return? Or itemize on Schedule A? If you itemized you either took the state income tax deduction or the sales tax deduction. Had to be one of those.
A State Tax Refund is taxable if you itemized deductions on that prior year's federal return and took a deduction for state income taxes instead of the sale tax. You got a deduction benefit for it so now you have to include it as income. If you took the standard deduction it is not taxable and you don't need to report it.