What gig work actually pays

Your delivery app tells you that you made $24 an hour today. That number is true, and it is also close to useless, because it is measured before everything that takes money back out of your pocket.

Three things come out of it. Fuel and wear on your car. Self employment tax, which is the part most people get caught by. And income tax on whatever is left.

Say you grossed $24 an hour and drove 14 miles in that hour, which is normal for delivery work.

Fuel, tires, brakes and maintenance run somewhere around 20 cents a mile on a used sedan. That is about $2.80 gone before you count anything else. It does not feel like it went anywhere because you paid for the gas last Tuesday, but it did.

Then there is self employment tax. As a contractor you pay both halves of Social Security and Medicare, which works out to about 14 percent of your profit. An employee splits that with their employer. You do not have an employer.

Income tax comes after that. How much depends on your total income for the year and the state you live in.

By the time all of that is done, a $24 hour is more like $17 or $18. Not a disaster, but not $24 either, and the difference across a year is thousands of dollars.

Mileage is the biggest deduction most drivers have, and a lot of people do not claim all of it.

The IRS lets you deduct a set amount for every business mile you drive. That rate is meant to cover gas, maintenance, insurance and depreciation together. For a driver doing 15,000 business miles a year, that is a large deduction, and it can be the difference between owing money in April and not.

The catch is you have to be able to show the miles. Some platforms include distance in their earnings export. Many do not. If yours does not, you need to track it another way.

Start by finding out what your real hourly rate is. Not the app number. The one after fuel, tax and the driving.

Once you know that, a lot of decisions get easier. You can see which platform actually pays better rather than which one looks better. You can see whether a long low paying order is worth taking. You can work out how much to set aside so April is not a surprise.

None of this requires you to work more. It mostly requires you to know what you are already earning.