Social Security benefit taxation

Thirteen states that tax Social Security benefits :

Minnesota

North Dakota

Vermont

West Virginia

Montana

Colorado

New Mexico

Utah

Nebraska

Kansas

Missouri

Connecticut

Rhode Island

Just like Social Security retirement benefits, Social Security disability benefits are taxable if your "base income" exceeds $25,000 (single) or $32,000 (married).

Your "base income" includes half of your Social Security benefits, plus other income (including tax-exempt interest).

This is an interesting paper which looks at how a relatively well-off retiree can avoid paying income taxes on Social Security taxes by taking out a loan against their life insurance policy (or, presumably against other assets).

Under scenarios studied, instead of making taxable withdrawals from their 401k, a couple could obtain similar "cash flow" by borrowing against their life insurance policy (or presumably other assets).

This is a good article which provides a good overview of the tax policies of states regarding Social Security benefits.