What counts as lost wages in a personal injury claim?

Lost wages include the gross income you would have earned but for the injury: regular hourly or salary pay for missed work, overtime you can document, lost bonuses and commissions, lost sick or vacation days you were forced to use, and the value of lost employer benefits such as retirement contributions. Self-employed claimants document lost profit instead of a paycheck.

Are lost wages calculated on gross or net pay?

Lost-wage claims are generally measured on gross (pre-tax) earnings, because the wages you lost were gross wages. How the eventual settlement is taxed is a separate question: under IRS rules, compensation for lost wages in a physical-injury case is often excluded from income, but lost-wage recoveries in non-physical claims can be taxable. Confirm tax treatment with a tax professional.

How do self-employed people prove lost income?

Self-employed claimants typically use prior-year tax returns, profit-and-loss statements, 1099s, invoices, and business bank records to show the income trend, then estimate the profit lost during the recovery period. Because there is no W-2 or pay stub, thorough business documentation is essential.

Can I recover lost wages if I used paid sick leave?

In many cases yes. If you were forced to use accrued paid time off, sick days, or vacation because of the injury, the value of that used leave can be part of the claim, because you lost a benefit you had earned. Keep records showing the leave was used specifically due to the injury.

Lost Wages Settlement Calculator 2026 | Past Income, Benefits & Self-Employed Loss

NOT LEGAL ADVICE. This tool produces an informational estimate of the wage-loss component of a claim only. It is not a settlement valuation and not legal or tax advice. Actual recovery depends on liability, evidence, insurance limits, comparative fault, liens, and negotiation. Consult a licensed attorney and a tax professional.

Lost wages are one of the most concrete and best-documented parts of a personal injury claim — and one adjusters scrutinize closely. This calculator estimates your gross wage loss from missed work, then adds the components people most often forget: overtime, bonuses, used paid leave, lost benefits, and self-employment profit. Enter your numbers for an itemized breakdown you can take into a negotiation.

Pay type

Hourly rate ($)

Hours missed (regular)

Overtime hours missed

Overtime multiplier

Lost bonuses / commissions ($) Value of paid sick/vacation leave you were forced to use ($) Lost employer benefits — retirement match, etc. ($)

How the calculation works

The estimate sums the gross income you would have earned but for the injury, across these components:

Regular pay. Hourly: rate × hours missed. Salaried: (annual salary ÷ 260 work days) × days missed, using the standard ~260 working-day year (52 weeks × 5 days).
Overtime. Rate × overtime multiplier × overtime hours missed — overtime you can show you would have worked is recoverable, but it must be documented (a history of regular overtime helps).
Bonuses and commissions you can prove you lost during the recovery period.
Used paid leave. If you were forced to burn accrued sick or vacation time, you lost an earned benefit; its dollar value is part of the claim.
Lost benefits. Employer retirement match, accrued pension value, or other quantifiable benefits you missed.
Self-employment. Lost profit = average monthly net profit × months affected, supported by tax returns and profit-and-loss records.

Why gross, not net: Wage-loss claims are measured on gross pre-tax earnings because that is what you actually lost. Whether the eventual recovery is taxable is a separate question governed by IRS rules (see below).

Documentation adjusters expect

Claimant type	Primary proof	Supporting proof
Hourly / salaried W-2	Employer wage-verification letter stating rate, hours/days missed, and dates	Recent pay stubs, prior-year W-2, timesheets, overtime history
Self-employed	Prior 1–2 years of tax returns (Schedule C) and profit-and-loss statements	1099s, invoices, business bank records, canceled contracts
Bonus / commission earner	Commission statements, bonus plan documents, prior payout history	Manager letter, sales records

Tip: The single most valuable document is a signed employer wage-verification letter that ties the missed time to a doctor's work-restriction note. Adjusters discount wage claims that are not corroborated by both medical and employer records.

Worked example

An hourly worker earns $28/hour, missed 160 regular hours (4 weeks) and 20 overtime hours they normally work at time-and-a-half, was forced to use $800 of vacation, and lost a $600 retirement match contribution:

Regular pay (160 × $28)$4,480

Overtime (20 × $28 × 1.5)$840

Used vacation leave$800

Lost retirement match$600

Estimated lost wages$6,720

This $6,720 is the wage-loss figure. It is typically added to medical specials and pain-and-suffering to build the overall claim value — try the personal injury settlement calculator for the full picture.

How lost wages are taxed

The tax treatment of a wage-loss recovery depends on the underlying claim. Under IRS Publication 4345 and IRC § 104(a)(2), proceeds received on account of physical injury or sickness are generally excluded from income — and that exclusion can extend to the lost-wages portion of a physical-injury settlement. By contrast, lost-wage recoveries in claims without physical injury (for example, many employment or defamation claims) are generally taxable as ordinary income. Allocation language in the settlement matters. See our settlement tax guide, and confirm your situation with a qualified tax professional.

Frequently asked questions

What if my hours vary week to week?

Use a representative average. For variable schedules, adjusters often accept an average of the 13 weeks (one quarter) before the injury, documented with pay stubs. Enter that average rate and the realistic hours you would have worked.

Can I claim future lost wages here?

This tool covers past wage loss through your return to work. If your injury reduces your ability to earn going forward, that is a separate, larger category called lost earning capacity, which requires present-value discounting. Use the lost earning capacity calculator for that.

Does workers' comp change this?

Yes. If a workers' compensation insurer already paid wage-replacement (temporary disability) benefits, it usually holds a lien or subrogation interest against any third-party recovery for the same wage loss, to avoid double recovery. Factor liens in when estimating net proceeds.

Sources: IRS Publication 4345 (Settlements — Taxability) and IRC § 104(a)(2); U.S. Bureau of Labor Statistics earnings data; standard personal-injury wage-loss documentation practice. Tax and legal rules change — verify with a licensed attorney and a tax professional.

Built and last reviewed by Mustafa Bilgic (non-attorney operator) on 2026-06-26.

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