Retirement plans for taxi drivers
Updated October 27, 2026
A taxi or livery driver paid as an independent contractor does not get an employer 401(k). Medallion owners and drivers who lease a cab are usually in that group. The retirement account is one you open, and the contribution is based on net profit after the costs of operating.
| Account | 2026 limit |
|---|---|
| Roth or traditional IRA | $7,500 ($8,600 at 50+) |
| SEP IRA | Up to 25% of compensation, capped at $72,000. Sole proprietors use about 20% of net earnings after half of self-employment tax. |
| Solo 401(k) | $24,500 employee deferral plus an employer contribution, combined cap $72,000. Catch-up $8,000 at 50+, or $11,250 at ages 60–63. |
Source: IRS Notice 2025-67. Figures are limits, not a recommendation of how much to contribute.
Medallion owners and lease drivers
A driver who keeps the fare and pays a lease, a medallion loan, or both is generally self-employed. A driver on a fleet payroll with tax withholding is an employee, and this page is not about that job. Both the owner-operator and the lease driver who receive a 1099 can use the same self-employed accounts. The lease payment reduces net profit, so it reduces how much a SEP IRA or Solo 401(k) can take.
Roth IRA, SEP IRA, and Solo 401(k)
A Roth IRA takes up to $7,500 in 2026, or $8,600 at age 50 and older, if your income is under the phase-out. A SEP IRA is employer money only, about 20% of net self-employment earnings after the Publication 560 adjustment, capped at $72,000. A Solo 401(k) adds a $24,500 employee deferral on top of a similar employer share, and it requires that you have no employees other than a spouse. These figures are from IRS Notice 2025-67. They are limits, not a projection of what an account will earn.
Social Security still counts
Self-employment tax includes 12.4% for Social Security, up to the wage base, on 92.35% of net profit. That is how fare income is credited to your Social Security record. It does not replace a retirement account you fund yourself. The Social Security Administration explains the self-employed rules in its self-employment publication.
Do taxi driver pay into Social Security?
Yes, through self-employment tax. Of the 15.3% tax, 12.4% is Social Security (up to the $184,500 wage base in 2026) and 2.9% is Medicare. That credit is how gig income shows up on a Social Security record. Social Security Administration: If You Are Self-Employed.
Frequently asked
Do taxi drivers get a 401(k)?+
Independent-contractor drivers do not get one from the cab company. Employees of a fleet might. If you are paid on a 1099, you open your own Roth IRA, SEP IRA, or Solo 401(k).
Does a medallion change which account I can open?+
The medallion is a business asset. It does not by itself pick the account. What matters is that the income is self-employment income and, for a Solo 401(k), that you have no employees other than a spouse.
Can I contribute if some weeks are slow?+
Yes. IRA and SEP contributions can be made up to the tax-filing deadline for that year, including extensions for a SEP. You do not have to contribute the same amount every week.
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