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What Taxes Do Uber Drivers Need to Pay?

Most Uber drivers need to make quarterly estimated tax payments and pay self-employment taxes. Consult a tax professional in your area for more specific tax advice about becoming an Uber driver.

Quarterly Estimated Tax Payments

When you drive for Uber, you don’t have income taxes taken out of your pay like you would with a traditional job. Instead, you, the independent contractor, may need to make your federal, state, and local income tax payments throughout the year. These are called quarterly tax payments or estimated tax payments. Whether you need to do this depends on how much you expect to earn during the year.

Fortunately, Uber drivers can claim all of their business expenses to reduce their overall taxable income. Drivers can take the standard mileage deduction or claim the actual amount spent. The standard mileage deduction in 2020 is 57.5 cents per mile driven for business use. If you claim the actual amount spent, you can deduct the cost of gas, repairs, depreciation, lease expenses, and other car-related expenses. Regardless of whether you claim the standard deduction, Uber drivers can also claim in-car amenities made available to riders.

Self-Employment Taxes

When you’re an employee, your employer pays half of your Social Security and Medicare tax liability. The other half comes out of your pay. When you’re an independent contractor, you have to pay your half plus the half an employer typically pays. The combined tax rate for both equals 15.3%. You can deduct the employer portion (7.65%) from your taxes.

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How Much Does Uber Take From Your Pay?

Drivers don’t get to keep all of the money a rider pays. Uber takes 100% of riders’ booking fees. Then, Uber takes a 25% cut from each fare. Drivers keep 100% of tips and bonuses. In the Uber driver app, you can exactly how much you’re earning vs. what Uber’s earning.

What Affects How Much You Can Earn by Driving for Uber?

Signing up for Uber doesn’t guarantee you the average 2020 wage of $17.21 to $19.89 per hour. How much you earn depends on the following:

How Far You Drive Per Ride

Part of your fare earnings is based on how many miles you’re driving and how long you’re driving. Longer trips bring in a bigger fare.

Where You’re Driving

Drivers earn different amounts based on where they’re driving. For example, if you drive in big cities or do airport runs, you can expect to make more than a driver working in a smaller suburb.

What Service Tier You Work In

Uber offers many service tiers. Not every tier is available in every location. Drivers with nicer cars that can hold more people enjoy higher rates than drivers who participate in UberX, which is the cheapest service tier for riders.

  • UberX: most affordable rates for 1 to 3 people
  • UberXL: affordable rides for groups up to 5
  • Uber Select: stylish rides for 1 to 4 people with highly-rated drivers
  • Uber Comfort: newer cars with more legroom
  • Uber Pool: shared rides, discounted rate per rider
  • Uber Black: premium rides in luxury cars
  • Uber Black SUV: premium rides for 6 in luxury cars
  • Uber LUX: top-rated drivers in luxury vehicles
  • Uber WAV: wheel-chair accessible vehicles
  • Uber Green: sustainable rides in electric vehicles
  • Uber Taxi: local taxi cabs

Surge Pricing

Uber uses an algorithm to detect rider demand and driver availability. When rider demand is high and driver availability is low, Surge Pricing goes into effect to incentivize drivers to give rides. Drivers earn the normal rate for rides multiplied by a surge price multiplier.

During times of Surge Pricing, drivers see what the multiplier is in the app. For example, when SURGE is at 2.5x, a ride that’s normally $10 would be $25.

Tips

As noted above, tips added an average of $1.31 per hour to a driver’s 2020 hourly wage. Being more personable and supplying extras like mints or tissues are ways Uber drivers can increase their chances of getting tips.

Job openings matching Driver in Uber

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  4. Driver gig – Earn on your schedule Stratford, CA 9 days ago

About the Author

Emily Cahill is a writer with over three years of experience creating digital content. Previous to that, she worked as a freelancer in publishing while attending Trinity College for English/Rhetoric. She specializes in SEO-driven content that highlights the unique properties of a product or service while making them digitally “findable,” particularly for the finance, geek culture, and lifestyle niches.

How Uber Commission and Fees Work

It’s not that difficult to understand the way Uber fees and commissions work.

For instance, when it comes to fees, the passengers are the ones who have to pay a booking fee, as well as per minute and mile fee for their ride. After the ride, you as a driver would be paid the majority of the fare you made. And you only get “the majority” and not all of it because Uber is going to get their cut, respectively the “Service Fee”.

More than 25%

The amount that Uber says it charges their drivers is 25%, but it actually takes a little more than that from their earnings. This is all due to the fact that some additional fees are taken by rideshare companies, resulting in a higher percentage for the cut.

In the past, Uber drivers had to drive around 2.36 miles to make $10 before fees, but nowadays, the prices were lowered by Uber. As a result, a driver will have to drive 4.71 miles to make the same amount of cash.

Fees

Also, there is the booking fee and a safe rides fee for every Uber ride, which is between $1 and $3. These fees vary by city, but the driver cannot actually see these in their bank account, as this goes directly to Uber.

So, the commission taken by Uber is higher if the ride fare is lower, meaning the rideshare drivers would make less. So, in the end, even if Uber claims to take 25% of its drivers, it will actually take up to 42.75%. If you are doing short rides, then it won’t be too profitable for you.

>> Read More: Loans for Uber Drivers

What About Uber Eats?

Uber rideshare drivers also have the option to deliver orders through Uber Eats. This entails opting in, accepting delivery orders and then transporting food and beverages to customers.

Choosing to deliver food can boost an Uber driver’s pay, especially on days when rides are slow. Uber encourages its drivers to diversify their payment options, depending on demand.

Uber Eats pays drivers a delivery fare based on pick-up, drop-off and distance. There is also a similar surge pricing for food delivery known as “Boost” that will increase pay at certain times of the day.

Conclusion

This paper provides a framework and suggests a terminology for understanding the hourly pay (or its equivalent) of Uber drivers. Too often, discussions of Uber workers’ pay have been marred by apples-to-oranges comparisons and confusing terminology. We find in this paper that hourly pay, net of Uber fees and driver vehicle expenses, is essentially on par with the 10th percentile of private-sector wages, or less than what 90 percent of Americans earn per hour in their jobs.

We also find that the gig economy represents just 0.10 percent of total full-time, full-year equivalent employment, a much smaller scale than scale estimates made without considering the part-year and part-time nature of most work in the gig economy. The basic lesson is that Uber and the gig economy are much larger when one measures participation than when they are scaled as a share of the economy. That is, there are a large number of people seeking to supplement their regular incomes by working in the gig economy for a short time or as very part-time workers. These “short-hour” participants do work alongside the minority of participants who rely on the gig economy work for their living—this is the basic duality of the gig economy. Nevertheless, as a share of the economy, Uber and the gig economy are rather small.

Unfortunately, the role of the gig economy is frequently exaggerated and by quite a bit. Consider this blog reporter’s summary of a main theme in a position paper from the advocacy group Third Way:

A third of the country benefits from the tail winds of automation and the gig economy while the other two-thirds are sailing against head winds. (Hohmann 2018)

In summary, there is no basis for saying the gig economy is a major driver of economic trends.

Introduction

There has been a continuing, strong interest in Uber and its role as the emblematic central player in the overall “gig economy.” This paper addresses two continuing items of interest concerning the gig economy but focuses on Uber, the leading gig economy firm. Specifically, the paper seeks to answer: (1) what is the hourly net income earned by Uber drivers—comparable to hourly wages or compensation of payroll employees—after accounting for Uber commissions/fees, vehicle expenses, benefits, and the interaction of expenses and benefits with the federal tax code?; and (2) what is the scale of Uber, and gig work, in the overall economy? The answers to these questions are now possible because of newly available Uber administrative data on Uber drivers provided in a research paper on gender equity of Uber driver earnings (Cook et al. 2018). Our analyses also contribute to the discussion of Uber pay by providing a framework for understanding various pay concepts and offering a terminology to advance discussion of Uber pay.

The examination of Uber drivers’ pay has recently reemerged due to a new report from MIT’s Center for Energy and Environmental Policy Research (Zoepf et al. 2018), which initially claimed that Uber drivers’ “median profit from driving is $3.37/hour before taxes, and 74% of drivers earn less than the minimum wage in their state.” Jonathan Hall, Uber’s research director, claimed in a Medium article that the MIT CEEPR study has a “flawed methodology that results in hourly earnings numbers that are far, far below what any previous study has found” (Hall 2018). In response, one of the MIT CEEPR study’s authors, Stephen Zoepf of Stanford University’s Center for Automotive Research, issued revised estimates of Uber wages, using two methods and Uber median net profits, to ranging from $8.55 to $10.00 (Zoepf 2018).

This paper articulates a conceptual and rhetorical framework that, hopefully, can facilitate a more productive discussion in the media and among researchers. In addition, this paper draws on Uber administrative data to derive the hourly compensation and wages of Uber drivers after deducting commissions, fees, and driver expenses. That is, this paper’s findings shed new light on Uber driver pay and, perhaps more importantly, delineate the issues that must be addressed to derive such estimates.

In regard to Uber’s scale, I have long been skeptical that Uber or “gig work” represents the “future of work” ever since it was clearly established that most Uber drivers do not drive as their main source of income, but instead do so to supplement other income sources (see Plouffe 2015a, 2015b; Mishel 2015). Uber in 2017 and 2018 has even taken to advertising for potential drivers by offering them the ability to “get your side hustle on” and arguing that “these days everybody needs a side hustle” (Uber 2016, 2017). Given the supplementary nature of Uber driving, and assuming that people will still need to earn a living in the “future of work,” it is hard to see why Uber—a company that heavily relies on workers who supply irregular and short hours—would loom very large in “future of work” discussions. This is not just an observation about Uber. Data about non-Uber on-demand employers (King and Ockels 2015; Intuit 2016) also indicate that most people work through these platforms on a part-time basis, primarily as a way to earn supplementary income.

Researchers in the past have attempted to scale the size of the entire gig economy by estimating the scale of Uber and making data-informed assumptions about what share of the gig economy is accounted for by Uber. This was the approach of Harris and Krueger (2015) who, based on Google Trends data, determined that Uber represents two-thirds of the total “gig economy” (on-demand labor platforms). EPI’s paper here uses Uber administrative data on the number of drivers and their weeks worked and weekly hours to scale Uber and the “gig economy.” Likewise, we use an estimate of Uber driver compensation to assess Uber drivers’ share of total economywide compensation. We then follow the Harris and Krueger 2015 approach in assuming that Uber accounts for two-thirds of the total gig economy. The following sections detail our findings, which indicate that the employment and compensation in the gig economy represent a very small share of total full-time-equivalent employment or compensation. This leads to our assessment that in any conference on the future of work, Uber and the gig economy deserve at most a workshop and not a plenary.1 This is especially the case if one considers that discussions of the future of work should focus on how people will earn their living. In that light, a focus on Uber and the gig economy’s ability to provide “side hustles,” or supplementary income, is not very central to the topic.

5. The Best Car To Drive For Uber

In addition to what we said about the Uber pay, you should know that Uber driver salary depends on the type of car driven. Working as an Uber driver with a luxury car will be paid differently than a normal car you see swarming the city streets on any given day.

The minimum fare you make for a XL goes up quicker compared to UberX. In addition with Uber XL you generally get a better quality of clients that tip better than UberX riders.

According to the U.S. News and World Report the list of the best cars for Uber and Lyft Drivers in 2020 includes:

  1. Toyota Camry Hybrid version
  2. Toyota Camry
  3. Honda Civic
  4. Honda Accord Hybrid version
  5. Honda Accord
  6. Mazda6
  7. Ford Fusion
  8. Honda Insight
  9. Ford Fusion Hybrid version
  10. Volkswagen Jetta
  11. Subaru Legacy
  12. Subaru Impreza

So, is Uber profitable for drivers? Even if you do not have the right car, by using our money gas saving tips and keeping a diligent track of your miles, you can boost your driving income.

Indeed as a rideshare driver, your biggest tax deductions will be the costs related to your car.

How much does a Driver make at Uber in California?

Average Uber Driver yearly pay in California is approximately $26,236, which is 49% below the national average.

Salary information comes from 194 data points collected directly from employees, users, and past and present job advertisements on Indeed in the past 36 months.

Please note that all salary figures are approximations based upon third party submissions to Indeed. These figures are given to the Indeed users for the purpose of generalized comparison only. Minimum wage may differ by jurisdiction and you should consult the employer for actual salary figures.

Start Driving With Uber Ride Share

For most side hustlers, Uber is worth it. But alternatives to driving with Uber are on the rise. Finally how much is Uber worth depends from your ability to be a successful driver.

Your earnings are a result of smart work and strategies to save money.

How Much Can You Earn Driving for Uber? The Bottom Line

How much do Uber drivers make? Working as an Uber driver can provide a steady revenue stream.

There are quite a few factors that will influence your daily earnings, and some of them are outside of your control.

Working in an urban area is probably the best way to enhance your earnings as an Uber driver.

But, by targeting opportunities to increase your profits, like working during surge pricing and high-volume periods, you can tilt the playing field to your advantage and earn more money for your time behind the wheel.

And remember, all Uber drivers set their own schedules and priorities.

So, for someone who wants to avoid the demands of an office-based or nine-to-five type job, the flexibility of an Uber schedule can be especially appealing.

If you are thinking about driving for Uber, sign up today and see what you can earn.

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