If Mark McCann solely cared about earning money, ride-hailing would not be his best choice.
“Fact is, it is nearly unimaginable to make a dwelling as a consequence of automotive depreciation, fuel, tolls, tires, and on and on,” the 64-year-old informed Enterprise Insider.
However for McCann, a part-time Lyft driver in Dallas, it isn’t the earnings — however the bills associated to ride-hailing — that makes the gig a retirement hack.
McCann is amongst many People who’ve turned to Uber and Lyft driving throughout their retirements. Incomes supplemental earnings, getting some social interplay, and avoiding boredom are amongst their major motivations, drivers have informed BI, however every has their very own private causes for getting into the gig economic system.
Drivers can deduct enterprise bills to scale back their taxable incomes
When he retired from a 32-year profession in gross sales, he had sufficient financial savings to cowl his dwelling bills, he mentioned. For leisure bills like journey and consuming out, nevertheless, he deliberate to make use of earnings from a part-time job and draw on his Social Safety advantages. People can start claiming Social Safety at age 62, although ready till their full retirement age — 66 or 67 — will increase the advantages one is entitled to.
However there was one problem with this plan: If People draw on Social Safety earlier than their full retirement age, then there is a restrict to how excessive their taxable earnings could be earlier than their Social Safety advantages take successful. The Social Safety Administration says it’ll deduce $1 from profit funds for each $2 one earns above the annual restrict, which is $22,320 in 2024.
For McCann, the best job would maximize his earnings however maintain it under the earnings restrict. He mentioned ride-hailing checked each bins.
In 2022, he made roughly $29,000 driving for Lyft — which is the quantity he earned after the corporate took its lower, in line with paperwork seen by Enterprise Insider. Nonetheless, drivers can deduct enterprise bills to scale back their taxable incomes. The most typical manner to do that is thru mileage deductions, which, as of 2024, permit drivers to scale back their earnings by $0.67 cents per mile pushed for enterprise use.
In 2022, when the mileage deduction was $0.625, McCann drove roughly 32,660 miles for Lyft. After accounting for roughly $20,400 in deductions, his taxable earnings fell to about $9,000, in line with BI’s calculations — McCann most well-liked to not share actual figures — effectively under Social Safety’s annual restrict.
In actuality, his taxable earnings was probably even decrease, given he might additionally make enterprise deductions for tolls, automotive washes, water and snacks offered to passengers, and different enterprise bills. McCann mentioned the entire deductions have been sufficient to offset the “majority” of his ride-hailing earnings.
Experience-hailing has been a retirement hack for McCann as a result of it is allowed him to complement his earnings whereas maintaining his taxable earnings in test by way of deductions, permitting him to attract on his Social Safety with out penalty.
McCann mentioned taking a standard 9-to-5 job for $18 an hour, for instance, — or roughly $37,000 a 12 months — would have a “$0 profit” for him financially after Social Safety penalties and taxes had been accounted for.
Retirees ought to examine the tax implications earlier than getting into the gig economic system
Lisa Greene-Lewis, a CPA and tax knowledgeable with TurboTax, informed Enterprise Insider that McCann’s technique seems to be a sound one.
“As a result of the driving force can deduct his mileage from his facet gig earnings and make under the earnings restrict, his Social Safety earnings is not going to be decreased,” she mentioned.
However even when a driver’s earnings falls under the annual restrict, Inexperienced-Lewis mentioned there’s one different state of affairs they need to think about. If the mix of 1’s earnings and half their claimed Social Safety advantages for the 12 months exceeds a sure threshold — as little as $25,000 — a few of their advantages could also be taxable.
“Many retirees usually start working facet gigs, do freelance work, or obtain different retirement earnings with out figuring out how different streams of earnings can influence how their Social Safety earnings is taxed,” she mentioned.
Since he started ride-hailing in 2021, McCann has accomplished over 5,000 journeys. Whereas the monetary advantages are the principle cause he drives, it isn’t the one cause.
Throughout his profession in gross sales, he was always round folks, McCann mentioned. So when he retired — and commenced interacting with fewer folks day-to-day — this was a tough transition. He mentioned ride-hailing has helped him fill a few of this void.
“Experience-hailing enabled me to fulfill fascinating folks from throughout the nation and world,” he mentioned, including, “The advantages are work once you need, be impartial, proceed to attract Social Safety, and pay minimal taxes.”
Are you a gig employee keen to share your story, pay, and greatest methods for earning money? In that case, attain out to this reporter at jzinkula@insider.com.
