Make Money With Uber | Pay, Expenses, and Taxes

Make Money With Uber | Pay, Expenses, and Taxes

If you’re out of work or hoping a side hustle can help you pay down your student loans faster, you might consider becoming an Uber driver. So naturally, you’re probably wondering, how much do Uber drivers make? On average, an Uber driver makes $19.36 per hour when you factor in tips and bonuses.

Of course, Uber drivers are not salaried employees, so those earnings aren’t guaranteed. All Uber drivers are classified as independent contractors. Being an independent contractor gives you the flexibility to work when and how often you want. However, you aren’t protected by minimum wage laws, and you don’t receive typical employee benefits.

Below, we’ll explore average Uber driver earnings, common Uber driver expenses, and some information about paying taxes as an independent contractor.

Average Uber Driver Earnings

Full-Time Uber Driver Earnings

Employment sites like Indeed.com and Glassdoor.com estimated full-time Uber driver earnings. Indeed.com found that full-time Uber drivers earn $30,478 per year based on 119 salaries reported. Glassdoor.com reported a higher full-time wage of $36,169 per year based on 146 salaries reported. The sites did not specify if this was before or after accounting for expenses.

Uber Driver Hourly Earnings with Tips & Bonuses

Across all tiers of service, Uber drivers in 2020 earned an average of:

  • Net earnings: $16.95 per hour
  • Plus tips: $18.16 per hour
  • Plus Uber bonuses: $19.36 per hour

Uber bonuses increased significantly in 2020 compared to 2018. In 2018, drivers’ pay with bonuses equaled just $14.73. Bonuses given because of the coronavirus can explain at least some of the difference.

Uber Driver Hourly Earnings by Service Level

Uber driver earnings vary depending on which service level they offer.

  • UberX: $18.97 per hour
  • Uber XL: $19.89 per hour
  • Uber Select: $17.21 per hour

The majority of Uber drivers only drive UberX. This tier pays drivers the lowest rates per mile and per minute, but since it’s a popular tier, it’s easy to find riders. Uber Select pays drivers more per mile and per minute, but since these trips cost a rider more, it’s likely Uber Select drivers get fewer trips, leading to a lower hourly rate.

Highest Uber Driver Earnings by Area

Where you drive greatly affects how much you’ll earn. Ridester found that drivers in the following areas earned the most on average:

  • New York City: $26.24 per hour
  • San Francisco: $22.30 per hour
  • Los Angeles: $21.91 per hour
  • New Jersey: $20.80 per hour
  • New York: $19.18 per hour

Uber Drivers in New York City earn so much more per hour because the city passed ride-hail regulations that created a pay floor and cut back on the number of drivers in the city. It required Uber to pay drivers at least a minimum wage, which was determined to be $17.22 net per hour or $27.86 per hour before expenses. Drivers who are logged into the app waiting for rides receive the minimum wage even if they do not have passengers.

Seattle established a similar law in September 2020 that requires Uber to pay drivers at least $16.39 per hour starting in 2021. This makes Seattle the second city to establish a floor wage for Uber drivers, so we can expect Seattle to become a high-earning area in 2021.

Lowest Uber Driver Earnings by Area

If you plan to start driving in one of these states, you might make less than expected:

  • Ohio: $16.98
  • North Carolina: $14.92
  • Oklahoma: $13.28
  • South Carolina: $12.90
  • Florida: $12.55

Ways Uber Drivers Make Money

Now, let’s take a look at the different ways Uber drivers make money.

Fares

Uber drivers receive a base fare plus compensation for how long and far they’re driving. According to the Uber website, how much you make per mile or per hour varies by city. Fares can change over time, too. For example, in 2019, Uber dropped rates in Southern California from $0.80 per mile to $0.60 per mile. This led to protests and strikes in California.

Tips

Riders can tip their driver during or after their ride. Tips vary greatly, and most riders don’t tip. A 2019 study from the National Bureau of Economic Research found that only 1 percent of customers always tip and around 60 percent never tip. The average tip (of those who do tip) is $3. Female drivers are more likely to get tips than male drivers.

Ridester’s 2020 driver survey also found that tips added just $1.31 per hour to a driver’s earnings in 2020.

Bonuses & Promotions

Uber offers different bonuses throughout the year that enable drivers to earn extra money. An example bonus on the Uber website states, “earn $30 extra for completing 20 trips this week.”

Sometimes Uber runs driver sign-up promotions that give new drivers a $500 to $1000 bonus for signing up and completing 50 to 100 rides in their first month. Sign-up bonus availability depends on the time of year and where you plan to drive.

Cancellation Fees

Uber drivers must wait a certain amount of time for the rider to show up. If the time limit passes, an Uber driver can mark the rider as a no-show. In most cases, the driver gets a cancellation fee of around $5.

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 Many Rides You Complete

The more rides you take, the more you’ll earn.

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.

What are Some Common Expenses for Uber Drivers?

Vehicle Maintenance

When you drive for your job, you drive more miles than you otherwise would. You’ll need to change the oil, other fluids, and tires more frequently.

Car Payment

If you don’t already own your car outright, you will need to continue making lease or car loan payments. According to Experian, the average monthly payment for a new car loan is $568. The average monthly payment for a used car loan is $397.

Car Insurance

Uber drivers need to maintain comprehensive and collision coverage on their personal auto insurance. According to data from the National Association of Insurance Commissioners, collision coverage costs $363 per year on average, and comprehensive insurance costs $160 per year on average.

Uber has additional insurance coverage that protects your car should you get into an accident while on the clock. However, drivers must pay a $1,000 deductible before the coverage kicks in. Uber also has third-party liability insurance and uninsured/underinsured motorist bodily injury insurance for drivers. Learn more about Uber and insurance here.

Gas

Gas prices vary significantly, depending on where you live. Uber drivers must pay for the gas used to operate their Uber business. You can claim gas using the standard mileage deduction or by tracking actual gas expenses and deducting an exact figure for gas.

In-Car Amenities

Some Uber drivers choose to offer riders in-car amenities like mints, phone chargers to use, water bottles, tissues, hand sanitizer, etc. Amenities aren’t required, but some drivers claim amenities help boost their ratings.

You can claim in-car amenities as a business expense outside of the standard mileage deduction.

Instant Pay Fee

Uber pays drivers weekly, but if you want your earnings faster than that, you will need to sign up for Uber Instant Pay. With Instant Pay, drivers can withdraw their earnings using a debit card for $0.50 per transaction. To avoid the fee, drivers can open an Uber debit account through GoBank.

Not every bank processes withdrawals immediately, so although it’s called Instant Pay, it could still take a day or two until the money appears in your account.

Health Insurance

Currently, driving full-time for Uber doesn’t mean you get benefits like health insurance. Uber drivers need to secure their own health insurance if they don’t already have health insurance through a family member, partner, or employer.

This might change in the future. In the Spring of 2020, Uber announced plans to establish a health insurance policy for drivers. Uber would reportedly pay for health benefits on a sliding scale based on hours worked.

Other Benefits

Uber doesn’t give drivers matching contributions to a retirement plan, life insurance, dental insurance, vision insurance, or other benefits. If you want these benefits, you will need to purchase them for yourself as an independent contractor.

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.

Is Becoming an Uber Driver Worth It?

Many individuals choose to become Uber drivers because they love the flexibility of setting their own schedule and being their own boss. Drivers also enjoy being able to meet new people, listen to music or podcasts on the job, and take off whenever they want. Seeing as the average Uber Driver can earn $17.21 to $19.89 per hour before expenses, it can be a decent job, especially in areas where the minimum wage is still set to $7.25 per hour. Of course, whether it’s financially worth it or not depends a lot on where you live, how often you plan to drive, and your other expenses.

Before jumping in and becoming an Uber driver, do the following:

  • Research average Uber driver earnings in your area
  • Estimate your monthly expenses
  • Talk to a tax professional about how much of your pay you’d need to set aside for taxes
  • Research the cost of health insurance and other benefits
  • Run the numbers to see if it’s worth it for you

Are you interested in becoming a Uber driver?

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