Dear Rusty: Why are my Social Security benefits being taxed at all? The Social Security FICA payroll taxes taken out of my paycheck while I was working were paid with taxable income. Signed: Disgruntled Taxpayer Dear Disgruntled Taxpayer: Many Americans share your belief that federal taxation of Social Security benefits is unfair because we pay into the program through payroll taxes on our taxable earnings. Unfortunately, Congress took a different view in 1983 when taxation of Social Security benefits was first enacted at a time Social Security was having financial issues. Congressional logic back then was that a beneficiary only personally pays 50% of the Social Security contributions made (the other half is paid by the employer) so, since your Social Security entitlement was only half paid for by you and the other half by your employer, the portion of your benefit attributable to your employer’s contributions should be taxable. So, it’s that other half – the portion of your benefit which resulted from employer contributions - which the 1983 Congress decided should be taxed. So, starting in 1984, if a beneficiary’s overall annual income from all sources exceeded $25,000 for a single filer or $32,000 for those filing married-jointly, half of that person’s Social Security benefits became part of their income taxable by the IRS.