How does the Social Security wage base cap change my self-employment tax as I earn more?

The 12.4% Social Security portion of self-employment tax applies only up to an annual wage base that the Social Security Administration raises most years for inflation. Once your combined wages and net self-employment earnings pass that ceiling, the Social Security piece stops, and only the 2.9% Medicare portion continues, with no upper limit. So your marginal SE tax rate effectively drops from 15.3% to 2.9% above the cap (before the high-earner 0.9% surtax). If you also have a W-2 job, those wages count first toward the cap, which can reduce the Social Security tax on your side business. This is why very high earners feel SE tax less on each additional dollar.