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So a life insurance pay out is non-taxable but a state retirement plan pay out is?

Sounds about right. My mother's death benefit from her state of Kansas retirement was taxable at the Federal level but exempt from state tax.


Isn't the rationale that the retirement contributions were originally made with pre-tax dollars, but the life insurance premiums were originally paid with post-tax dollars?

(Not that anything to do with taxation is necessarily rational.)

ETR
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