Transactions that are refunds from a prior purchase should correspond to the category the initial purchase was in. This will then properly subtract the total amount from that spending category and not count in your spending or income.
For example, if you purchase a $40 pair of jeans and later return them, make sure both transactions - the $40 charge and the $40 refund - are set to the 'Shopping' category. Rocket Money will then automatically balance these transactions, showing zero impact on your shopping budget.