If you dream of being your own boss, ditching the 9-to-5 life and setting your own schedule, you aren’t alone. Uber and Lyft, the early pioneers of the ride-sharing economy, have attracted hundreds of thousands of drivers looking for the same lifestyle.
But before you take the plunge into a ride-sharing career, here are some things you need to know about driving for Uber or Lyft, as told by those who have done the job. Working for a ride-sharing company can be one of the best ways to earn extra cash, but you’ll quickly realize it’s not always as easy -- or as lucrative -- as it seems.
1. You’re responsible for paying the tax on your income
When you drive for Uber or Lyft, you’re considered an independent contractor, not an employee. That means income tax isn’t taken out of your paycheck -- you need to pay it on your own.
For example, let’s say you made $40,000 a year in fares. After Uber’s cut, you’d take home about $32,000. Then, you need to pay the tax on that income, and that amount depends on a variety of personal factors. Ultimately, your Uber driver pay will be a lot less than what you earn in fares.
Janessa, who started driving for Uber for the flexible schedule, got tripped up by her new tax situation the first year she filed. “The first year I did my taxes with Uber, I was so lost,” she said. “I hadn’t been keeping track of all my miles, and since there isn’t a tax deduction, it was a bit stressful.”
Luckily, there is relief for Uber and Lyft drivers who need some extra guidance. Most tax experts and certified public accountants are familiar with the industry by now and can help you plan ahead for taxes on your Uber driver pay. Otherwise, you could end up with a hefty tax bill.
You can also use free online tools to calculate your estimated tax payments. Popular DIY tax software, such as TurboTax or H&R Block, can also help ride-share drivers avoid making common mistakes on their taxes.
2. Your expenses can help lower your tax bill
Although the tax implications when you drive with Lyft or Uber put a dent in your earnings, you can recoup some of that money.
As an independent contractor, the IRS considers you self-employed, which means you can write off your work-related costs as a business expense on your taxes. For Uber and Lyft drivers, this includes things such as your miles driven, gas, oil changes, car repairs, cellphone service and accessories and car washes. Even supplies, such as water bottles and gum for your riders, count.
Tracking your expenses and mileage might seem like a lot of work, but there are tools that make it less painful. To help make tracking her expenses easier, another driver, Sandy, used a separate credit card for gas. Lyft also provided her with the tools to help her figure out her tax payments.
“Lyft calculates the mileage driven directly in the app, so I was grateful to have their weekly reports and annual tax form with the totals already calculated,” she said.
Elizabeth, another Lyft driver, uses the QuickBooks Self-Employed app. “It helps me keep track of what to set aside for taxes, and it even tracks my mileage for me,” she said.
After her rocky tax experience, Janessa started using the Stride app. “It tracks all of your miles and can add in when you buy goodies for your passengers, or get your car washed, which can be deducted from your taxes at the end of the year. It’s really been a lifesaver,” she said.
3. You need to strategize your driving time
There’s an ongoing debate about whether Uber and Lyft drivers make more money on short trips or long ones. The average Uber cab trip in the United States is just 6.4 miles, according to data from SherpaShare, a company that helps on-demand workers track their mileage and analyze their time. SherpaShare co-founder Ryder Pearce said drivers tend to like longer rides to break up the monotony and get a larger fare, Forbes reported.
Even though drivers technically make more money on longer rides, they have less control over the destination, which could hurt their income in the long run. For example, if a passenger gets dropped off in the middle of nowhere or in a suburban area, the drivers probably have to travel longer and farther to get back to a high-traffic area.
Some drivers prefer to target riders with shorter commutes, even though they make less money on each trip. That way, they stay in high-traffic areas, making it easier to pick up the next rider. Turning down rides can impact a driver’s acceptance rate, which companies use to measure performance.
“If you turn down a longer drive, it can impact your overall acceptance rate,” Lyft driver Elizabeth said.
Whether you decide to target short or long trips is up to you. As with most things in life, it’s all about balance. With some trial and error, you’ll figure out the right mix to maximize your work time, increase your earnings and keep your acceptance rates high.
4. Your ratings matter -- a lot
Both Uber and Lyft have a driver rating system to encourage good customer service and driving habits. The companies can kick you out of the system for having poor customer reviews. The system is built on a scale of one to five stars, with five being the best. Lyft recommends drivers keep their rating at least at 4.8 stars, while Uber expects a minimum 4.6-star average. If you go below those averages, you might not be able to drive for the company anymore.
The bar is high, but it’s not difficult to keep your ratings up with some good old-fashioned customer service. Lyft driver Sandy recommended making the customers feel as though they are more than just a passenger in the car, “with total control of the temperature, windows and even music.”
Lyft driver Elizabeth said keeping a clean car is also key to a stellar rider experience. “It should go without saying, but have a clean car, both visually and scent-wise. I’ve been in some smelly cars as a rider.”
She also recommended offering treats and extras, such as lollipops and an auxiliary cord. “Riders get excited to listen to their own music, and everyone loves candy. Lollipops are cheap, and I don’t have to worry about them melting in the car,” she said. “Some other things that might help: bottles of water, gum and baby wipes.”
Uber driver Janessa agreed that extras, such as charging cords, are important to customers. Just as important: delivering service with a smile.
Uber and Lyft drivers aren’t just at the mercy of their customers, though; this rating system is a two-way street. Drivers rate their passengers, too, so good behavior, pleasant conversation and general respect are encouraged by both parties.
5. Your hourly income could be lower than expected
People who drive for Lyft make about $17 an hour, not including bonuses or tips, although the driver’s salary can range from $5 to $40 an hour, according to data from Glassdoor. The hourly income for people who drive for Uber isn’t available on Glassdoor, although the site said the national average salary is about $30,000 a year. Whether you drive for Lyft or Uber, your income can fluctuate, depending on where you work and your out-of-pocket costs.
San Diego Lyft driver Sandy said she was surprised by how her expenses impacted her take-home pay. “After calculating the time I was behind the wheel and how much I was making, it averaged to about $10 an hour,” she said. “It was definitely a lot less than I expected, considering I was having to pay for gas and set aside a portion of the money earned to put toward taxes.”
Kevin, a Denver-based driver who started driving for Lyft to earn extra money for college, had a similar experience. “I ended up making around $10 to $15 an hour, depending on the night. It was a bit less than I expected,” he said. “It sounded nice until I realized that I was only working 12 hours a week and I had to pay for all the gas I was using.”
Janessa, who drives in San Francisco, said she was pleasantly surprised with her hourly rate, although it did fluctuate -- sometimes drastically. “On average, I make about $24 an hour. Some days I’ve made $50 an hour and some I’ve earned $18. It varies, but usually evens out to around $20 to $30 per hour,” she said.
Despite these fluctuations, Janessa ended up pulling in enough work to support herself through Uber driving. “I actually didn’t expect to make that much,” she said. “I heard you could make extra money, but what I realized was you can actually live off it, too.”
If you’re worried about low or inconsistent income, both Uber and Lyft offer average hourly guarantees in certain cities, which means if you don’t earn the guaranteed amount during eligible hours, they’ll cover the rest. Of course, there are requirements you have to meet and it’s not available in every city, but it’s nice to know there are options in some areas.
6. You need to know how to handle difficult customers
Working with the public means you could experience a range of issues, from general rudeness to people getting sick in your car. Sandy said dealing with drunk or obnoxious people can be the hardest part of the job.
“I just had to hope I didn’t get a puker, after the horror stories I heard from other drivers,” she said. And although Sandy never had to end a ride before the final destination, she did experience some customers who were pretty obnoxious.
“Luckily, Lyft makes it very easy to rate the passengers, just as they rate drivers, and also leave notes on the type of passenger they were to help out other drivers,” she said.
Lyft driver Kevin said he also avoided any customer catastrophes. “I didn’t have too many difficult customers, but when I did, I just took them to their destination, then gave them a bad review. With Lyft, if you’re under a certain star rating, you’re not allowed to use the app,” he said. He also offers a helpful tip for drivers working near colleges.
“If you’re Lyfting in a college town, just expect eight freshmen girls to pack themselves in the back of your car without asking,” he said. “Happened to me a few times.”
7. Your passengers might be the best part of the job
That’s not to say every passenger will be difficult. In fact, every Uber and Lyft driver interviewed said meeting new people is the best part of the job.
“I worked in the college area, which was mostly kids and professors from all over the world,” Sandy said. “They were all quite interesting. I think there may have been over a dozen languages spoken in my car while I was a Lyft driver.”
Kevin also loved meeting so many new people and getting paid to do it. “There’s always going to be a story from the person you give a ride to,” he said. “Whether that story is interesting or not is dependent on the person, but each person was pretty unique.”
Janessa said driving for Uber gave her exposure to new cultures and people. “I was actually surprised at the diversity of people who use Uber, people from all ages and background,” she said. “It really unites people.”
8. There are driver support groups and online forums to help you
Lyft and Uber drivers can join independent local support groups to share tips, swap stories and learn from each other. Not to mention that it can help you build a solid network. Sandy found a Lyft driver group on Facebook by searching the site.
“The local Lyft group was a great place to get info from experienced drivers,” she said.
Janessa said she got a lot of help and support from ride-share expert The Rideshare Guy. “I originally signed up [for his emails] when it was time to do taxes because he had amazing tips for ride-share drivers, and I found his other articles helpful as well,” she said. “I like hearing about other Uber drivers’ experiences and how to learn from them.”
UberPeople.net is another online forum where on-demand workers in several fields can meet each other, share advice and tips and even air their complaints. There are threads dedicated to many hot topics, such as which cars are best for ride-share driving, insurance, technology and apps and breaking news.
9. It’s tempting to work around the clock
According to a study from the Benenson Strategy Group, 52 percent of Uber drivers work fewer than 30 hours a week; and 75 percent of the part-time drivers also hold down another job besides Uber driving. Flexible hours make it easy to pick up extra money and control how much you work, but it can be hard to set boundaries and avoid becoming overworked.
“Since you can work your own hours as a driver, it’s easy to set your own schedule,” Lyft driver Sandy said. “Although it does become hard to turn off the app when you’re in the groove and making money, even though you planned to log off/go home.”
As people who drive with Uber and Lyft get more hours under their belt, it can get easier to set better work/life boundaries. For example, Lyft driver Elizabeth sees her friends on “irregular nights,” so she can drive on Friday and Saturday nights during peak hours. Janessa has also found a better work/life balance, but she said the hardest part is making time for herself, not just finding time to socialize.
“Since Uber is so flexible, it’s made it easier to balance work and social life. If I have plans that night, I will work in the morning/day,” Janessa said. “Since I love driving for Uber so much, it’s actually hard to stop working sometimes, so I have to make time in between trips for myself -- whether that’s stopping at a coffee shop or taking a nice walk.”
10. There are ways to boost your income
Both Lyft and Uber offer their drivers ways to earn extra income beyond their share of rider fares through tips and bonuses. Lyft drivers keep 100 percent of their tips, which are optional for riders to give their drivers. Uber has a restrictive cash-only tipping policy, but the company allows drivers to keep 100 percent of their tips, an in-app option to tip should be available to all drivers by the end of July 2017.
Lyft runs also various promotions throughout the year, such as its driver referral rewards. Sandy said a driver could earn up to $1,000, depending on the promotion. Lyft driver Elizabeth said the company also offers commission bonuses.
“With Lyft, if you drive a certain amount each week (typically a set number of rides and acceptance rate) you can earn more of your commission,” Elizabeth said. “For example, if you would normally earn 75 percent commission, you could increase your commission to 85 percent.”
Uber has a similar driver-referral program. The company also runs weekly incentives for drivers, which reward them for the number of trips driven and higher fares in certain locations. Janessa said the Uber driver pay from the weekly incentives can boost income and help to cover her out-of-pocket expenses. She said the bonus can vary between $70 and $250, but it is an incentive for her to continue driving. Sometimes, it pays for her gas for the week.
11. Incorrect drop-off and pick-up locations are a sore spot
When Uber and Lyft passengers request a ride from the app, their phone’s GPS records their location. That way, the driver knows exactly where to pick them up. Unfortunately, this technology can fail from time to time, which means drivers can wind up at the wrong location.
“The Lyft app is still not perfect,” Sandy said. “So there would be times I would arrive to pick someone up, and they would be mad at me for not being able to find them right away -- even though I would go to where they dropped the pin on the map.”
In addition to GPS failures, passengers can enter their pick-up or drop-off location incorrectly. That can be stressful for both the driver and rider.
“The worst was when a customer would drop the pin on the side of the road and expect the Lyft driver to stop and pull over (blocking traffic) somewhere not in a loading zone or parking lot,” Sandy said.
If this happens, Lyft recommends asking the passenger to cancel the ride and then re-request with the correct location, or ask them to move to an appropriate coverage area so they can select the right location. Uber also allows customers to edit their locations mid-ride for better accuracy.
In general, it’s a good idea for drivers to text or call their passengers to confirm their pick-up location and then double-check the drop-off point after they get in the car. This can save both parties precious time, and help preserve your good service ratings.
Note: Drivers’ last names were omitted at their request.
Copyright © 2017 Entrepreneur Media, Inc. All rights reserved.
This article originally appeared on Entrepreneur.com. Minor edits have been done by the Entrepreneur.com.ph editors.