YMMV but I'm finding very few of these that are taxable.  Either the client didn't itemize in 2021 (so no taxable recovery) or they hit the SALT cap in 2021 (so no tax benefit).

If it's only the $500 ($250) on the form that likely means they itemized and had a VA balance due for 2021 so then you *might* have to allocate the refund between amounts paid/withheld in 2021 and amounts paid in 2022 (but you're likely already not taxable because of the paragraph above).

Rick (in VA)