According to the instructions for Form 1040-NR-EZ, tax payers must refer to Publication 525 to decide if any of the state tax refunds need to be listed as additional income in Line 4. Here, for Non-Resident Aliens the Itemized Deduction Recoveries discussion in Publication 525 applies. It states with respect to state tax refunds that
you must include in your income the full amount of a refund of state or local income tax or general sales tax if the excess of the tax you deducted over the tax you didn't deduct is more than the refund of the tax deducted.
Consider a 2018 federal tax return 1040-NR, Line 37 Itemized Deductions
x$ are listed based on
min(state income tax, 10000). Then, is the following correct?
1) tax not deducted refers to
state income tax - x
2) tax deducted refers to
3) excess refers to the
tax deducted - tax not deducted
And thus, if
excess > refund, the refund must be listed as income, which should be generally true for most non-resident aliens?