Untangling Taxes from Personal Injury Damages

In personal injury cases, the amount of money awarded for lost future earning capacity can be affected by whether the jury considers the plaintiff’s potential earnings before or after taxes. This decision can significantly impact the final award. If the jury uses gross earnings (before taxes), the award will be higher than if they use after-tax earnings. This can make a big difference in cases where the potential earnings are high or the injury is severe. In personal injury cases, there is a debate about whether to calculate damages using pre-tax or post-tax income. Some jurisdictions say to only consider after-tax income, but in Florida, the law says to use gross income. This means that the jury should not worry about taxes when deciding how much to award the injured person. It’s important for lawyers and courts to know about this rule. The court said it was okay to tell the jury that their award wouldn’t be taxed. Two more cases agreed with this. They didn’t talk about whether the award should be based on gross or net pay. The first appellate court to directly state that an award for loss of future earning capacity should be based on gross income was the First District Court of Appeal in St. John’s River Terminal Co. v. Vaden in 1966. They said that the amount of income tax which might become due on a person’s prospective future earnings is too uncertain to be considered in fixing damages. This means that when determining how much to award for lost earning capacity, the court should only look at the person’s gross earnings, not how much they would have to pay in taxes. Twenty years later, the Fourth District Court also agreed with this decision. These court decisions are about whether a trial court should tell the jury that the money they award in a case won’t be taxed. The decisions show that it’s up to the trial court to decide whether to give this instruction or not. None of the decisions say that the trial court has to give or deny the instruction. Also, the decisions don’t conflict with the idea that the jury should base its calculation of damages on the amount of money before taxes. Another case, Leaseco, Inc. v. Bartlett, also supports the idea that damages should be calculated based on gross income, not after-tax income. The Basel v. McFarland & Sons, Inc. case in Florida may seem to contradict the idea that gross income should be used to calculate damages for loss of future earning capacity. In this case, the court upheld a jury’s decision to award a certain amount for past lost wages and future loss of earning capacity, even though the plaintiffs argued for a higher amount based on expert testimony. However, the court’s reasoning did not establish a legal rule on the proper measure of future loss of earning capacity, so it doesn’t conflict with the idea that gross income is the right measure for calculating damages. The Florida Statutes state that when calculating damages for lost earning capacity, it should be based on gross income. This means the amount of money you would have earned before taxes. There are laws that automatically reduce the amount of money you can receive for lost earnings to account for the fact that you won’t have to pay taxes on it. This confirms the rule that damages for lost earning capacity should be based on gross income. In 1988, Florida passed a law about medical malpractice. If a person chooses to settle their claim in arbitration, they can only get 80% of their lost wages and future earnings. If they reject arbitration and go to trial, there is a cap on the amount of money they can get for pain and suffering. The law says this is because getting all of their lost wages and future earnings would be too much money, since they wouldn’t have to pay taxes on that money. In Florida, if you get hurt in a car accident, your car insurance has to pay for some of your medical bills and some of your lost wages. The part that pays for lost wages will only give you 60% of what you would have earned if you weren’t hurt. This is because the government doesn’t tax that money, so it’s like getting a little extra in your pocket. It used to be different, but the law changed to make it simpler. In Florida, when someone is injured and can’t work, they can get money for the income they’ve lost. This money is based on their gross income, not the money they actually take home after taxes. There are some exceptions to this rule, such as in wrongful death cases where the money is based on the person’s net income after taxes. In a recent court case, the court said that damages should be based on gross income, but it’s not clear what exactly was decided in that case. Under Florida law, damages for lost earnings or lost future earning capacity in wrongful death cases are based on net income, rather than after-tax income. This means that income taxes are not considered by the jury when determining the amount to award as damages. However, this rule does not apply to punitive damages, which are still taxable. The Florida Wrongful Death Act requires certain elements of damages to be based on net income. Other rules and statutes may also affect how damages are calculated in wrongful death cases.

Source: https://www.floridabar.org/the-florida-bar-journal/untangling-taxes-from-personal-injury-damages/