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Supplemental Analyses - Impact of Taxes


Many jurisdictions require adjustment of lost earnings analyses for the impact of income taxes.  However, simple deduction of taxes from estimated lost earnings grossly understates the actual loss. 

When a plaintiff receives a lump-sum award, the amount received is stated in terms of present value.  The computation of present value necessarily imputes receipt of interest income on the sinking value of that award.  This reduces the money available to compensate the plaintiff for his or her loss.  A tax analysis must also adjust for the increased taxes to paid on that interest income.  When both sides of the tax impact picture are properly examined the net impact on the present value of lost earnings is often negligible.

Vocational Economics keeps abreast of the applicable tax laws - both federal and multiple states - and provides a comprehensive review of the tax impact of a lost earnings award.





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