Many people assume that once they retire, taxes will become less of an issue. The reality, however, is that seniors are liable for taxes just like working adults.

For example, if you have a traditional IRA or 401(k), the withdrawals you take from that account during retirement will be treated as ordinary income and taxed accordingly. Similarly, if you hold investments in a traditional brokerage account, you'll pay taxes on their associated gains.

In fact, many seniors are surprised to learn that even their Social Security benefits are taxed at the federal level. The only exception is for those with minimal retirement income -- namely, seniors who live on Social Security alone. There are also some states that impose a tax on Social Security -- 13 to be exact. The good news? There are 37 states that don't require seniors to pay taxes on Social Security at the state level, so if you live in one of these, you can retain a bit more of your money.

States that don't tax Social Security

If you live in one of the following states during retirement, you can rest easy knowing that your Social Security benefits won't be taxed at the state level:

Alabama Alaska Arizona Arkansas California Delaware Florida Georgia Hawaii Idaho Illinois Indiana Iowa Kentucky Louisiana Maine Maryland Massachusetts Michigan Mississippi Nevada New Hampshire New Jersey New York North Carolina Ohio Oklahoma Oregon Pennsylvania South Carolina South Dakota Tennessee Texas Virginia Washington Wisconsin Wyoming

Keep in mind that some of the states on this list don't have a state income tax at all. For example, Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming don't impose state income taxes, and Social Security income falls under that umbrella. Furthermore, while New Hampshire and Tennessee do have a state income tax, it's only on dividends and investment income, so Social Security doesn't fall into that category.

Remember, though, that just because you live in one of the above states doesn't mean that your benefits won't be taxed at the federal level. To see if you'll pay federal taxes on Social Security, you'll need to calculate your provisional income, which is essentially your non-Social Security income plus 50% of the amount you collect in annual benefits. If your total falls between $25,000 and $34,000 and you're a single tax filer, or between $32,000 and $44,000 as a joint filer, then you could pay federal taxes on up to 50% of your Social Security income. And if your provisional income exceeds $34,000 as a single tax filer or $44,000 as a couple filing jointly, then you could pay federal taxes on up to 85% of your benefits.

Furthermore, there's talk of Illinois changing its tune on Social Security and imposing a state tax on benefits to help address its brewing financial crisis. Illinois residents should therefore consider themselves warned that they could see their tax burden go up.

Of course, the decision of where to retire shouldn't just boil down to whether your state taxes Social Security. There are other factors, like housing prices and the general cost of living, that you'll need to take into account as well. Furthermore, just because your state doesn't tax Social Security income at present doesn't mean it won't happen in the future. But for now, you can use the information above for retirement-planning purposes and hope that things stay the same by the time your golden years actually kick off.