Local and State Tax Refund Taxable?

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If last year I had a state tax refund of $1,350 and itemized deductions on a schedule A, but had over the $10,000 in local and state taxes (filing married), is the state tax refund considered income for this year?

For example, if I had itemized $9,000 in local and state taxes (line 5a) plus $5,000 in local real-estate taxes (line 5b) for a total of $14,000 on line 5d, but then had to fill in $10,000 on line 5e because $10,000 is the cap, is $10,000 considered a standard deduction for local and state tax and therefore the refund is not taxable? Or since there was a schedule A (due to other itemized deductions such as mortgage interest/dependents) it's automatically considered income?

[DanaB27]

No, the State refund is not automatically taxable.

General, the state refund is only taxable if all three of the following are true:

• 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 in Turbo Tax, and TurboTax will calculate the taxable amount for you.

Please follow these instructions to enter the State refund:

1. Login to your TurboTax Account 
2. Click on the Search box on the top and type “1099-G”
3. Click on “Jump to 1099-G”
4. On the following screen, check the first box "State or local income tax refunds" and continue.
5. Answer "Yes" to "Did you get a state or local tax refund?"