With ride-sharing platforms like Lyft offering flexible earning opportunities for drivers, the gig economy has seen a surge in popularity. Whether it’s a side hustle or a full-time gig, many individuals are turning to Lyft as a means to supplement their income or even as their primary source of revenue.
This article discusses the average income of Lyft drivers, factors affecting their earnings, earning structure and a few tips to earn more.
Also read: Where is Lyft available?
What is the average income of Lyft drivers?
Though Lyft promotes the possibility of earning well, determining a precise average can be challenging.
Different sources cite varying figures, ranging from $15 to $25 per hour before expenses.
ZipRecruiter reports an average of $15.57, while Indeed mentions $24,895 annually, and Glassdoor reports an average of about $35,360. Remember, these are just averages, and your earnings will likely differ.
Factors affecting the earnings
Key factors that influence Lyft driver earnings:
- Location: Earnings potential can vary significantly depending on your location. Cities with high ride demand generally offer drivers more opportunities to earn. Metropolises like New York City or Los Angeles typically have higher fares and more frequent ride requests than smaller towns or rural areas.
- Time of day: Peak hours, such as during rush hour or late at night on weekends, often yield higher fares due to increased demand. Drivers willing to work during these busy periods can earn more per hour.
- Driver efficiency: Efficiency plays a crucial role in a driver’s earnings. Maximising the number of rides completed per hour and minimising downtime between rides can significantly impact overall earnings. Experienced drivers often develop strategies to optimise their routes and minimise idle time.
- Vehicle type: Lyft offers different services, including Lyft Standard, Lyft XL (for larger groups), and Lyft Lux (luxury vehicles). Drivers with larger or more luxurious vehicles typically earn higher fares, but they may also face higher operating costs.
- Incentives and bonuses: Lyft often provides rewards and bonuses to drivers to motivate them to finish a set number of rides within a specific timeframe or to drive during busy hours. Making the most of these opportunities can substantially increase your earnings.
Earning structure of Lyft drivers
Here’s a breakdown of how drivers generate income:
- Base fare: Every ride begins with a base fare, which varies depending on the service level and location. This fee accounts for the driver’s time and initial distance travelled.
- Time and distance rates: In addition to the base fare, drivers earn money based on the time and distance of each trip. Lyft predetermines these rates and may differ across markets.
- Tips: Riders can choose to give tips to their drivers using the Lyft app, giving drivers a chance to earn more on top of the regular fare.
- Bonuses: Lyft provides bonuses to drivers in locations and during peak demand periods. While some bonuses are pre-planned, others pop up spontaneously as demand fluctuates. The bonus amounts you can earn vary depending on the circumstances.
Do Lyft drivers have to pay Income tax directly?
Employees don’t have to worry about handling and paying their income taxes directly. The company takes care of that by deducting the monthly taxes from their paycheck. However, legally, if you’re an independent contractor, you’re seen as running your own small business. This means you’re responsible for paying income taxes on the money you earn from Lyft directly to the IRS (Internal Revenue Service).
The tax rate for income differs between employees and independent contractors. Additionally, a self-employment tax kicks in if you make over $400 in a calendar year. Overall, as an independent contractor, you end up paying about 7.65% more in federal taxes compared to being an employee. But this doesn’t always translate to a higher total tax bill.
You can deduct your work costs, such as your cellphone bill, tolls, snacks for passengers, and mileage, from your taxable income. This helps lower the amount of taxes you owe. As a Lyft driver, it’s crucial to grasp state and federal tax matters. Failing to file your taxes correctly could result in owing back taxes and facing penalties from the IRS or state tax agencies.
Tips to earn more
Here are some tips to help you maximise your earnings as a Lyft driver:
- Strategic scheduling: Plan your driving hours during peak demand times, such as rush hours, weekends, and special events. This can help you capitalise on higher ride fares due to increased demand.
- Stay flexible: Remain adaptable with your schedule to take advantage of sudden spikes in demand or lucrative bonus opportunities offered by Lyft.
- Know your area: Familiarise yourself with high-traffic areas, popular destinations, and event venues in your city to position where ride requests are most likely.
- Provide excellent service: A positive rider experience often leads to higher tips and ratings, translating into more frequent ride requests and increased earnings.
- Maintain a clean and comfortable vehicle: Ensure your car is neat, in good condition, and equipped with water and charging cables. This will improve the rider’s experience and could lead to receiving higher tips.
- Use destination filters: Lyft offers destination filters that allow you to set a destination for your next ride. Use this feature strategically to ensure you’re heading towards areas with high demand while minimising dead miles.
Also read: How to delete Lyft account?
