Ask a Lawyer - Archive

Do courts base personal injury damages from lost earnings on lost earnings before or income taxes after income taxes? I am not asking about how IRS treats it, just how the Courts like it calculated.

Thank you for your inquiry. Please note that I am a Texas licensed attorney, so the guidance I can give you is based upon general principals of law. I would encourage you to contact a local attorney to understand how the courts in your area view this particular issue.

In most states, compensation for lost earnings due to personal injury are based on the gross amount of wages lost by the victim, rather than after-tax "take home" pay, and may not be reduced because of income tax, Social Security, retirement contributions, or other withholdings. However, because the damages received in a personal injury case are not taxable, a jury may reduce the total amount of compensation to take that into account. These laws vary from state to state, and recovery can depend of the skill of the lawyer presenting the case.