L. A. and Paula file as married taxpayers. In August of this year, they received a $5,420 refund of state income taxes that they paid last year.

How much of the refund, if any, must L. A. and Paula include in gross income under the following independent scenarios? Assume the standard deduction last year was $24,400. (Leave no answer blank. Enter zero if applicable.)

c. Last year L. A. and Paula claimed itemized deductions of $29,450. Their itemized deductions included state income taxes paid of $10,600, which were limited to $10,000 due to the cap on state and local tax deductions.

What is the refund to be included?

Please explain how to get answer.