Your monthly check could take a hit if you live in one of these 13 states. By Michael DeSenne, Executive Editor January 2017 Lots of retirees are surprised by the big bite that taxes can take out of a nest egg. Depending on where you live, the tax hit can be especially painful once you account for state and local sales taxes and property taxes. Making matters worse, some states even tax Social Security benefits, the most important source of income for many retirees.See Also: 23 Cheapest Places Where You Will Want to Retire Here's a list of the 13 states that tax Social Security (as of 2016): Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, North Dakota, Rhode Island, Utah, Vermont and West Virginia. But just because a state taxes Social Security doesn’t mean it’s a bad place to retire. Overall, Colorado and West Virginia are actually quite tax-friendly to retirees despite the tax on Social Security. Weigh the entire tax picture before deciding where to settle down in retirement. See our rankings of the worst states for taxes on retirees and the best states for taxes on retirees.