Uber and Lyft Driver Salary, Risks, and Costs
I would like to list a major risk in driving for a Lyft salary and Uber salary and also potential costs associated with it. Please consider these before signing up. For the most part, it is true you can earn a salary above $25 an hour driving for either Uber or Lyft (before taxes). I will explain in this next section.
[Update 1-28-2014: Here is a new post estimating hourly salaries with surge pricing on Uber and prime time tips (PTT) on Lyft and calculated tax rates, including self employment taxes: Salary and Tax rates for Lyft an UberX Drivers]
To see more about deductions, you can view this post: Mileage or Depreciation Deduction for your Uber and Lyft Taxes?
Lyft Salary:
You get to keep 80% of all “donations” for each Lyft. There are many cities, such as LA and Boston, that have required a minimum donation to be the recommendation donation. There is some risk here in that the client could pay 0% of the suggested donation, and the minimum donation had been instituted in some cities as this was a growing problem. In most cities, this hasn’t been a problem and this is the reason why Lyft has stuck to the donation model for Lyft salaries. Even when it was a bad problem in Boston, it would happen only once or twice to certain drivers. The driver keeps any amount over the suggested donation, which is designated as a tip by the Lyft system. The money you receive is expected to pay for gas, mileage, and wear and tear. [Update 2014-01-22: Boston, and Seattle, Denver, Atlanta, and Washington, D.C. are no longer considered new cities. Lyft is no longer paying drivers hourly minimum Lyft salaries in those cities. See post: Lyft Driver Salary Changes with Prime Time Tips!]
New City Bonuses
[Update: The below statements are only valid for Lyft cities that still have the New City Bonus, or minimum hourly Lyft salaries. To my knowledge, there are none of those cities now so this is historical information] For “new cities,” they have guaranteed minimum hourly rate (or Lyft salary) they will pay you to stay on the road, regardless of if you drive anyone or not. Normally, the Lyft salary is $15 an hour. There are certain times called “power hour” where you are paid $25/hour minimum Lyft salary. In Boston (may be different in other cities), it is 7-8am and 5-6pm every weekday, 5pm-2am Friday, 4pm-2am Saturday, and about half of the available hours on Sunday. When Lyft drivers are making minimum hourly Lyft salaries, they do not get Prime Time Tips which are active when demand exceeds supply. This is similar to Uber’s Surge Pricing. The guaranteed minimum hourly Lyft salary works best if you know ahead of time that there will be very few people going out. This was the case Friday-Sunday in Boston before NYE. Many people were still on vacation and all the college kids are back home. I picked up roughly a person ever 90 minutes and spent some time sitting outside my house, which was less than a mile away from Copley Square. I didn’t drive very much and still got paid $25 an hour on average, even sitting in the busiest parts of the city. This is the main reason why you will see Lyft drivers camp out at certain locations that they think they will get a fare. Its a win-win. They don’t move and increase the chance of them picking up a fare so either way they’re earning money. The Lyft salary paid under the New City Bonus will need to be reported to the IRS if this amount is over $600. Lyft only pays you if you have not made enough per hour. Say you work one hour and the minimum salary is $25 for this hour. You only collected $10 in fares, so you only get $8 for the hour after Lyft takes their 20%. This means that Lyft will pay you $17 directly. This is the amount under “New City Bonus.” This is payment directly from Lyft (see below under Cost). As I drove at the end of the year, I made sure that my Lyft salary through the New City Bonus was under $600, which it was. However, throughout the year I can see my Lyft salary through the New City Bonus easily going over $600 unless you ensure you are picking up enough passengers so that you won’t get paid by Lyft directly. Remember that these minimums are not subjected to the 20% Lyft keeps of every “donation.” They will pay you $25 an hour, not $25 minus 20%. The minimum hourly Lyft Salary is very attractive as you will need $29 in fares every hour to beat the power hour minimum hourly rates.
Any Lyft City that is not considered “New”
This is how many if not all Lyft ciy is now operating. Lyft salaries will be paid directly from the Lyfts they give out. In addition, when demand is high, Prime Time Tips kick in and can make a huge difference in salary for the night. There was one night when the PTT doubled my income or take home Lyft salary. In Boston, during the daytime hours you can expect to earn a salary of $15-$20 an hour, more if its a holiday or special event in the city. On nights and weekends, you can expect to earn a salary of $25-30 per hour, and $35-$50 per hour if there is PTT on for most of the night. My Lyft salary averages between $30 to $35 over the span of 6+ hours so that’s a pretty good hourly salary for that many hours. In general, I have been making a higher Lyft salary or average hourly wage with PTT in effect.
Uber Salary:
UberX is the rideshare version of the regular black car Uber. Normal people can drive on UberX with their personal vehicles and personal auto insurance (except in some cities like New York City). There are considerably more UberX drivers than Uber black drivers. With the release of UberX XL (or UberXL), there are many more UberX drivers. The Uber salary is only paid from the trips you give out. You pick up people, and they pay a certain fare for the ride. Your Uber salary is 80% of the fares and the fares are instantly charged to the client directly via the Uber app. Your Uber salary is expected to pay for gas, mileage, and wear and tear of your vehicle. Uber advertises that tip is not necessary. If the Uber client wants to tip, they will need to give it to you in cash. As of now, there is no way to tip on the Uber app but I hope they will include it down the road. There was an end of the year promotion where Uber drivers keep 100% of all fares, which was fairly generous as it can increase your Uber salary by 20%.
Surge Pricing:
Here is a post on Uber Zone Based Surge Pricing: Uber Zoned Based Surge Pricing Also strategies on how to navigate Uber Zone Based Surge Pricing: Strategy for Uber’s Zone Based Surge Pricing for Customers and Drivers Uber Surge Pricing kicks in when demand exceeds supply. It goes up in 25% increments and maxes out at 400% (or 4x). There have been articles around December 2013 where surge pricing was at 8x, but now it maxes out at 4x. Uber also made an announcement not to increase surge pricing during storms or natural disasters. Surge pricing can have a large effect on an Uber salary. I would estimate that the surge pricing is about 25% or more of my total Uber salary for the year. I have made an Uber salary of up to $90 per hour because of surge pricing. However, Uber has another feature for passengers called Surge Drop that can have a negative effect on an Uber salary. With Uber Surge drop, customers are notified when the Surge goes down. They will then have about 30 seconds to take advantage of the lower price. This has a negative effect on Uber salaries as some passengers will choose to wait a few minutes in order to save some money. There have been many times where some of us Uber drivers sit in the middle of an Uber Surge zone and only get a ping once the surge goes went away, so surge pricing is no longer a good guarantee that you will get a higher Uber salary for that day.
Insurance Risk
Refer to the updated post concerning Lyft and Uber Insurance Policies. Both Lyft and Uber now insure cars for commercial purposes when the driver is in Driver Mode. Read the post for more details. [To note, Uber Black and Uber SUV does not need these insurance policies as drivers need to get their own livery insurance.]
Uber Driver and Lyft Driver Costs
During the 8 hours I drove for Uber on New Years Eve, I drove about 100 miles. Using the government mileage rate of depreciation at $0.56 a mile, that is about $56 worth of depreciation, gas, etc. It was a good night in that I made a gross Uber salary of $200 that night, so my take home Uber salary is about $150 from Uber. If you were to figure for taxes, remember that this is considered self-employment income.
Taxes
If you are to drive for a Uber salary or Lyft salary and want to deduct your mileage or gas/maintenance, keep careful notes of how much you drove as deductions on self-employment income are the most audited section of tax returns. Some people recommend noting the odometer before and after every Lyft or Uber session. The federal rate is 15% self-employment tax (Social Security and Medicare), on top of your normal federal and state taxes. Figure for at least 40% total tax rate on your Lyft salary or Uber salary. This rate may be lower or higher, depending on what your annual income is due to the progressive tax rate. After figuring this out, the hourly rate (Uber salary or Lyft salary) doesn’t look so attractive. Uber doesn’t make it clear when they will send you a 1099. Lyft says there are two different situations they will be sending you a 1099:
- Received more than $600 directly from Lyft (New City Bonus, Referral Bonuses, etc)
- A Lyft salary of $20,000 and had more than 200 Lyfts annually
If you do file Uber income or Lyft income in your tax return, make sure to have good notes before attempting to claim a deduction on the mileage. If you are looking to earn a large Uber salary or Lyft salary, I would highly recommend you claim a deduction. This year, I have been taking more careful notes so I can claim mileage as the tax deduction. [Update as of June 2014: I can deduct about 1/3 of my total income from my Lyft salary and Uber salary because of mileage on my car. It has saved me about $700 in taxes so far, which is how much I used in gas for Lyft or Uber this year.] I am not a certified tax consultant so any information above is purely for reference only. Please speak to a certified tax professional about your specific tax situation. I am putting this rudimentary information here to help other drivers estimate what their costs and tax burden is from their Lyft salary or Uber salary. Please do not use these calculations verbatim without analyzing your total income and tax situation.
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