Fort Lauderdale Personal Injury Lawyer Helps Debate Post-Tax/Pre-Tax Future Earnings Capacity Calculations
A Fort Lauderdale personal injury attorney that represents defendants or plaintiffs in personal injury cases has surely acquainted themselves with the number of legal doctrine that affect the amount of the plaintiff’s recovery. Doctrines such as the personal injury protection or PIP threshold defense, cap on damages, collateral source setoffs, apportionment of fault or the statutory abrogation of joint and several liability. However, there is one law that is often overlooked by lawyers, although its resolution can affect the amount of the plaintiff’s recovery just as much as everything else mentioned here.
Weather damages awarded for lost future earnings capacity should be calculated on the basis of gross earnings or net earnings, after-tax earnings is the commonly neglected issue here. Put another way, is the jury, when calculating how much to award the plaintiff for loss of future earnings capacity, should deduct the income tax that the plaintiff would have paid on the income that he/she would have been able to earn had this individual not been injured.
A Fort Lauderdale personal injury lawyer says the answer to this question could have substantial impact on the amount of the award in addition to the amount the lawyer receives as compensation for his/her work.
In order to figure out the damages for loss of earnings capacity in the future, one needs to take the sum of the earnings that the plaintiff would have been able to earn in the future, had the individual not been injured, reduced to the present value; subtract the amount the plaintiff is still able to earn after their injury, projected into the future and also reduced to the present value. If gross earnings are used, then the award by the jury for lost earning capability will be higher than if the earnings used were after taxes. If the plaintiff’s disabilities are severe or the amounts are very high, then the difference could be quite substantial.
Compensatory damages awarded in personal injury actions are not subject to the federal income tax and therefore add to the pre-tax/post-tax controversy.