Question about the state and local tax section

[degrom7]

After transferring my information from last year to this year's TurboTax, the state and local tax refund section automatically filled in the information for 2020. I am confused about this section because I received a state refund of $630 when I filed last year, but it is showing $351 instead. I never received anything else or had any portion of my refund taken back from the state after filing last year. Should I just leave this section the way it is? I also don't have a 1099-G.

[SamS1]

Yes.  Let's start with your 2019 state tax refund.  Your state tax refund should not be taxable unless you itemized deductions in 2019 and you took a state income tax deduction.  This is normally state taxes withheld from your W-2.  Since the State and Local tax deduction is limited to $10,000 on your itemized deduction, a proportional share of your state taxes could be limited if the total deduction of your 2019 state and local taxes was greater than $10,000.  If this was the case, you did not gain full deductibility of your state income taxes so the full amount of your state tax refund would not be included in your 2020 tax return as income.  

Review your 2019, Sch A, State and Local taxes section to determine if your total state taxes were greater than $10,000.

The pandemic has affected your taxes in many ways. Including reporting in TurboTax the amount of stimulus money you received. Click Here for more information on how the Pandemic affected your 2020  taxes.

[degrom7]

Thanks for the reply. I checked my 2019 tax return. I took the standard deduction and the state withheld $5,000 for taxes. Just to confirm, I should just leave the that section alone on TurboTax right? Thanks!

[npierson7]

If you took the standard deduction last year, your state refund is not taxable. Just leave the section as is.