What Is Loss of Earnings?
Loss of earnings is the income an injury has already cost you. It is part of your economic damages and can include:
- Hourly pay or salary for missed days
- Overtime, commissions, tips, and bonuses
- Lost benefits, such as retirement contributions
- Paid leave or vacation time you had to use
Texas requires these losses to be presented as the net loss after federal income tax (CPRC §18.091).
What Is Diminished Earning Capacity?
Diminished earning capacity is a lasting reduction in your ability to earn money in the future. It applies when an injury forces you to change careers, work fewer hours, retire early, or give up promotions you were likely to receive.
Examples include:
- A warehouse worker with a spinal injury who can no longer lift and moves to a lower-paying desk job
- A nurse with nerve damage who can only work part time
- A young person whose brain injury limits future education and career options
How Lost Income Is Proven
Past losses are proven with records. Future losses need evidence that connects your injury to reduced earnings.
- Records: pay stubs, W-2s, tax returns, and an employer letter about missed time
- Medical proof: doctors’ opinions on your permanent restrictions
- Vocational evidence: an expert on what work you can still do
- Economic analysis: an economist’s estimate of lost lifetime earnings, reduced to present value
How Lost Earnings Affect Your Claim
Lost income is often one of the largest parts of a serious injury claim. PIP can cover up to 80% of lost income early on, regardless of fault, under Insurance Code ch. 1952. The at-fault party can be held responsible for the rest. Your recovery is reduced by any share of fault, and most claims must be filed within two years. A free case review can help you measure what the injury has cost your career.
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Frequently Asked Questions
What is the difference between lost wages and loss of earning capacity?
Lost wages are income you already missed, such as paychecks while you were in the hospital or off work recovering. Loss of earning capacity looks forward. It compensates for a reduced ability to earn over the rest of your working life because of lasting injury, even if you go back to a lower-paying job.
Can I claim lost earning capacity if I was unemployed or self-employed?
Often, yes. Earning capacity is about your ability to earn, not only your last paycheck. Work history, training, licenses, and business records can show what you could have earned. Self-employed people usually prove losses with tax returns, invoices, contracts, and bank records rather than pay stubs.
How is diminished earning capacity calculated?
Doctors describe your permanent limits, a vocational expert explains what jobs you can still do, and an economist compares your expected earnings before and after the injury over your remaining work life. The difference is reduced to present value. A jury then decides how much to award based on that evidence.
Does PIP pay lost wages in Texas?
Yes. Personal injury protection coverage pays up to 80% of lost income, along with medical expenses, up to your policy limit and regardless of fault. PIP applies unless you rejected it in writing. You can still pursue the at-fault driver for losses PIP does not cover.
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