The state tax refund need to be added back as ordinary income next year.
Say you deduct exactly the state tax $ 500 so you don't have any refund from
state. Now you have a choice to deduct $1000 more from your paycheck for
state tax. You have $1000 more deduction from federal return sch A for this
year, but you will get $1000 refund from state. This same $1000 will be
added back to next year's federal return.
This could reduce your tax liability if you earn a lot this year and earn
much less nex
