$7,500.00
$20,000.00
$400,000.00
$250,000.00
$257,500.00
$150,000.00
$7,500.00
$20,000.00
$400,000.00
$250,000.00
$257,500.00
$150,000.00
When a personal injury prevents you from working — either temporarily or permanently — the financial consequences can dwarf even substantial medical bills. Lost income and loss of earning capacity are among the largest components of a serious personal injury claim, and they deserve careful, evidence-based calculation. This calculator helps you quantify two distinct concepts: past lost wages (income you have already missed) and the present value of future loss of earning capacity (the discounted value of reduced future income).
Past lost wages are the simplest component to calculate and prove. They represent the income you actually lost from the date of the injury to the date of settlement or trial. For salaried employees, this is straightforward: multiply your daily gross wage by the number of workdays missed. For hourly workers, multiply your hourly rate by the hours missed. For self-employed individuals or freelancers, documentation is more complex but equally valid: tax returns, invoices, client contracts, and bank statements all help establish your pre-injury income baseline. Remember to include not just base salary but also overtime, bonuses, commissions, tips, benefits, and employer pension contributions that you would have received but for the injury.
Loss of earning capacity is a more complex and often larger component. It arises when an injury permanently or partially limits your ability to earn at your pre-injury level. Even if you return to work, if the injury forces you into a lower-paying role — because you can no longer perform your previous duties, cannot work full-time, or must change careers entirely — you are entitled to compensation for the difference over your remaining work life. Courts value this loss as the present value of the annual income differential, discounted to account for the time value of money: a dollar received today is worth more than a dollar received in ten years.
The present value discount is a critical concept in economic damage calculations. If you will lose $20,000 per year for 20 years, the undiscounted total is $400,000 — but because a lump-sum payment today can be invested to earn returns, courts reduce this figure to its present value. At a 3% discount rate, $20,000 per year for 20 years has a present value of approximately $298,000. The discount rate used in court is typically the risk-free government bond rate or a rate prescribed by jurisdiction-specific rules. Opposing experts frequently debate the appropriate discount rate, and actuarial testimony is often required for large claims.
In addition to the discount rate, courts and economic experts apply negative contingencies (reductions for the possibility that the plaintiff might not have worked the full remaining period due to other factors) and positive contingencies (adjustments for likely salary growth and promotions). A formal vocational expert report and economic expert report are essential evidence for significant loss-of-earning-capacity claims, particularly those exceeding $100,000.
This calculator provides a present-value estimate using an annuity formula, which is the standard academic and legal approach. Use it as a first approximation before engaging a forensic economist for your formal claim.
Past Lost Wages: Daily Wage × Days Missed
Annual Earning Capacity Loss: Pre-Injury Annual Income − Post-Injury Annual Income
Present Value of Future Loss (annuity formula): Annual Loss × [(1 − (1 + r)^−n) / r] where r = discount rate and n = remaining work years. If the discount rate is 0%, present value = Annual Loss × Years.
Total Loss = Past Lost Wages + Present Value of Future Earning Loss.
A discount rate of 2–3% is commonly used in U.S. courts (approximating long-term Treasury yields). Higher rates reduce the present value of future losses; lower rates increase it. If your remaining work life is long (e.g., 30+ years) and the annual income gap is large, the present value of future earning loss will dominate the total figure. For young plaintiffs with decades of work life ahead, this component can reach millions of dollars in catastrophic injury cases.
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A 43-year-old construction worker permanently unable to perform heavy lifting earns $30,000/year less. With 22 work-life years remaining, the present value of that annual loss at 3% is ~$449,730, plus $33,600 in past wages, totalling ~$483,330.
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A worker who was fully disabled for 6 months (130 workdays) but returned to full capacity. No future earning capacity loss — total income damages are limited to $26,000 in past lost wages.
Lost wages refers to income you have already failed to earn between the date of injury and the present. Loss of earning capacity refers to your reduced ability to earn income in the future. A person may have both: for example, 90 days of past lost wages during recovery plus a permanent 30% reduction in future earning potential due to ongoing physical limitations.
For self-employed claimants, acceptable evidence includes: federal tax returns (Schedule C) for 2–3 years prior to the injury, 1099 forms, bank statements, invoices, client contracts, and CPA letters confirming average income. Courts recognize that self-employed income can be variable; averaging income over 2–3 prior years is a common approach.
A forensic economist is an expert witness who calculates the present value of economic damages, including future lost earnings, future medical costs, and lost benefits. They are essential for claims exceeding approximately $100,000 in future economic loss, as their testimony provides the evidentiary foundation for the present value calculation that courts require.
Yes. Lost employee benefits — including employer-matched retirement contributions, health insurance premiums, stock options, paid vacation, sick leave, and disability insurance — are compensable components of your economic damages. A forensic economist or benefits expert can quantify these losses, which are often substantial.
The appropriate discount rate is typically the yield on U.S. Treasury bonds of comparable duration, which has historically been 2–4%. Courts may specify a rate in some jurisdictions. For large claims, consult a forensic economist. As a general estimate, 3% is a reasonable default for most calculations.
Generally not, unless you can demonstrate that your injury will eventually force you out of that role, that you are working through pain at risk of worsening your condition, or that the injury limits your ability to advance, earn bonuses, or work overtime as you would have previously. Evidence of ongoing limitations and physician restrictions are critical.
In most U.S. personal injury settlements, compensatory damages (including lost wages) are not taxable under IRC §104(a)(2). However, the gross (pre-tax) wage is typically used as the damage base, not net take-home pay, because the tax-free nature of the settlement compensates for this. This issue is complex and state tax treatment may vary; consult a tax attorney for large settlements.
Work-life expectancy is the expected number of years a person of your age, sex, education, and health would remain in the labor force. Standard tables are published by the U.S. Bureau of Labor Statistics and are commonly used by forensic economists. It is generally less than calendar life expectancy and accounts for periods of unemployment and retirement.
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