Whether or not you have to report your state income tax refund on your federal income tax return depends on if you itemized your deductions using Schedule A (Form 1040) (PDF):

No, the amounts received from a reverse mortgage are not taxable. A reverse mortgage is a loan. The lender is paying you (in a lump sum, a monthly advance, a line of credit, or a combination of all three) while you continue to live in your home. With a reverse mortgage, you retain title to your home. Depending on the plan, your reverse mortgage becomes due with interest when you move, sell your home, reach the end of a pre-selected loan period, or die. Because reverse mortgages are considered loan advances and not income, the amount you receive is not taxable. Any interest (including original issue discount) accrued on a reverse mortgage is not deductible until you actually pay it, which is usually when you pay off the loan in full. Your deduction may be limited because a reverse mortgage loan generally is subject to the limit on Home Equity Debt discussed in Part II of Publication 936, Home Mortgage Interest Deduction.