The gig economy and advances in technology have made for interesting job opportunities. Ride-hailing services like Lyft are now a formidable part of the transportation industry. The rideshare company, which is part of the Lyft Inc. portfolio, is one of the two most popular taxi-alternative services in the U.S.
But how much do Lyft drivers make? Keep reading to find out.
What Is Lyft?
Lyft is a rideshare platform currently operating in the U.S. and parts of Canada. The platform was established in 2012 and went public through a Nasdaq listing in March 2019.
Lyft operates in over 600 cities in the U.S. and 10 in Canada. More than 2 million drivers operate on the platform, serving over 12 million customers. Customers book rides with their smartphones through the Lyft app, which is available via Google Play or the App Store.
What Is the Average Income for Lyft Drivers?
Estimates vary for how much Lyft drivers earn. Indeed puts the average annual earnings for drivers on the rideshare platform at $31,144 based on 35 self-reported earnings — 39% below the national average for drivers.
Glassdoor estimates the average earnings for a Lyft driver to be $18 per hour based on 240 self-reported earnings. Multiply that by 40 and then by 52, and that works out to an annual income of $37,440.
Lyft drivers are not salaried employees of Lyft — when you sign up as a driver, you do so as an independent contractor. Like other gig workers, Lyft drivers receive a 1099 statement instead of a W-2 and are not subject to minimum wage requirements. You drive on your own time, in your own car. You alone handle your vehicle maintenance, gas and most insurance costs, though Lyft does have some programs to help with costs. You can also rent a car from Lyft if you don’t have your own or would prefer not to use it for the service.
Drivers’ earnings are based on the time they spend driving with passengers in their car and the distance they drive with passengers. Lyft calculates drivers’ pay from the moment a driver picks up a client, beginning one minute after the driver taps “Arrive.”
The app calculates charges by tallying several costs:
- Base fare
- Time rate
- Distance rate
Good To Know
The cost per trip varies according to what city you’re driving in. Bonuses and adjustments due to things like higher-than-usual demand also determine how much you make at the end of the day.
Though driver rates are calculated based on how long they drive with passengers in the car and the distance they drive with passengers, Lyft takes a cut of the gross fare and pays the rest out to the driver. The Lyft website does not state how much of a cut they take, but most sources estimate around 20%-25%. So, what’s the average daily take-home pay after Lyft’s share?
On a typical day, a driver makes between $15 and $18 per hour, according to Indeed and Glassdoor estimates — that’s $120 to $144 in eight hours. Driving 40 hours per week, you could expect to earn $600 to $720 per week, or $2,400 to $$2,880 per month before taxes and not including expenses.
Income Taxes for Lyft Drivers
Keep in mind that no income taxes will be withheld from your pay when you drive for Lyft as a 1099 worker. But you owe taxes on the money that Lyft pays you. That means you’ve got to calculate your own income taxes. You are also on the hook for self-employment tax to the IRS as soon as you make over $400 as a 1099 contractor in a calendar year.
That federal self-employment tax rate is 15.3%. This amount covers the usual employee withholding — 7.65% — and the amount that a normal employer would contribute — 7.65% — to Medicare and Social Security tax for a W-2 employee. So Lyft drivers, like other independent contractors, pay 7.65% more in Social Security and Medicare withholding than W-2 employees, plus any federal, state and local tax they owe.
However, Lyft drivers can deduct expenses from their gross income, which reduces their tax liability. Write-offs include a standard mileage deduction or actual expenses involving business use of your car, tolls and parking, amenities you provide to riders and cell phone expenses directly related to your business.
What Impacts Lyft Earnings?
Several factors affect how much you’ll make as a Lyft driver. Your income can shift depending on how many hours you put in, where you’re based, your expenses and whether you get tips from customers.
Here’s a closer look at factors that impact your income.
Where You Live
Your location determines how much you earn. For example, the higher the cost of living is in your city, the more you’ll make while driving for Lyft. That means if you’re plying the roads of Seattle, you’ll make more than a driver in Wyoming. Also, city drivers make more than those in rural areas.
There’s also customer density. Busier places naturally have more customers. When you leave your house and turn on the app, do you immediately receive requests, or do you have to drive closer to town? If you receive customer requests as soon as you turn on your app, you’re poised to earn more money faster.
Surge pricing is a model that capitalizes on high demand for ride-sharing. Such high demand could arise from rush hour and increase even more combined with rainy weather. Working during peak hours can dramatically increase your earnings.
Bonuses and Promotions
Lyft has a bonus program for drivers. The platform schedules promo and bonus periods randomly, allowing hardworking drivers to rake in more pay. Lyft allows drivers to keep 100% of the bonuses they earn during promotion periods.
Lyft allows drivers in some cities to offer services in different tiers. This enables them to choose between providing regular service and providing luxury service. A driver with a high-end vehicle, 2014 model or later — 2016 in Houston, Texas — who maintains a rating of at least 4.85, qualifies to provide luxury service. Lyft’s luxury tier is categorized into Lyft Lux, Lux Black and Lux Black XL.
It may seem self-evident, but the number of hours a driver works naturally translates into the amount they earn. Drivers who spend more hours behind the wheel will typically earn more than those who work just a few hours per day.
Is Driving for Lyft Worth It?
Driving for Lyft is flexible compared to a full-time, or even part-time, job. Drivers can work at their convenience as they take care of their business, creating time for hobbies and family members or friends.
The cost of running the business can be expensive. It’s not unheard of for expenses to run Lyft drivers out of business. Furthermore, earnings are limited by demand — if there aren’t enough customers to keep you busy for 40 hours a week, your earnings will be less than those of a driver in a high-demand area.
A major pro is that drivers control their own schedule, and in large part, their earnings. For many, the flexibility of operating as a Lyft driver outweighs its downsides, which is probably why at least 2 million drivers are using the platform to generate income.
FAQ on Driving for LyftHere are the answers to some commonly asked questions about driving for Lyft.
- How can I earn more with Lyft?
- You can earn more by taking advantage of promotions, putting in more hours, and providing excellent services to customers who in turn might tip you.
- Does Lyft offer drivers the option to rent a car?
- Lyft's platform offers rental cars to drivers who can not afford to buy a car. This is possible thanks to Lyft's partnership deals with Flexdrive and Hertz through the Express Drive program.
- Does Lyft cover gas and car maintenance expenses?
- Lyft does not cover gas and car maintenance expenses. Drivers are independent contractors, and they are expected to take care of these expenditures with the money they earn from trips. However, Lyft does have programs to help with the costs, like a partnership with Openbay.
- Does Lyft pay for accidents?
- Yes, Lyft provides insurance for accidents. The platform has third-party liability coverage that pays up to $1 million for personal injuries and property damage if a driver is involved in an accident. This insurance is contingent on the terms of service at the time an accident happens. Claims go to the driver's insurance company first before the platform determines whether it will pay for damages.
- How long does it take to start earning on Lyft?
- It takes around 30 minutes or less to enter your credentials — which are typically your phone number, email address, driver's license and other identifying information. If you have a car, Lyft will determine its road readiness. You also have to authorize the platform to run background checks on your driving record. This process usually takes a few days.
Daria Uhlig contributed to the reporting for this article.
Data is accurate as of Aug. 10, 2022, and subject to change.
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