How to Calculate Lost Wages After a Car Accident

Medical bills usually come with a clean paper trail. Lost wages are messier — the number depends on your pay structure, how much work you actually missed, and whether the insurer trusts your documentation. Our settlement calculator includes a dedicated lost wages field for exactly this reason: it’s one of the three core inputs behind your estimated payout, alongside medical expenses and the pain and suffering multiplier.

What Counts as Lost Wages

Lost wages cover any income you didn’t receive because your injuries kept you from working — missed shifts, cancelled contracts, used sick days and PTO (which insurers still treat as a loss, since you spent a benefit you otherwise wouldn’t have used), and, in some cases, lost self-employment revenue. It’s distinct from loss of earning capacity, which applies when an injury permanently reduces what you can earn going forward rather than just what you missed while recovering.

The Basic Calculation for Hourly and Salaried Employees

For a straightforward W-2 employee, the math is simple: multiply your hourly rate by the hours missed, or prorate your salary by the days missed. The complexity comes from documentation — insurers want more than your word.

Documentation Insurers Actually Ask For

• A signed letter from your employer confirming your pay rate, hours or days missed, and whether you used any paid leave.
• Pay stubs from before and after the accident, showing the gap or the reduction in hours.
• A doctor’s note stating the dates you were unable to work, tied to the diagnosis from your treatment records.
• Tax returns and 1099s for self-employed claimants, since there’s no employer letter to lean on.

Missing any of these is one of the most common reasons an adjuster undervalues a lost wage claim — not because the loss wasn’t real, but because it wasn’t proven on paper.

Calculating Lost Income When You’re Self-Employed

Without a fixed paycheck, self-employed claimants typically build their lost income figure from a combination of prior tax returns (to establish a baseline average monthly or weekly income), bank deposit records for the period around the accident, and, where available, cancelled contracts or client emails showing specific work that had to be turned down. A pattern across at least two years of tax returns carries far more weight with an adjuster than a single strong month.

Reduced Earning Capacity: A Separate, Larger Claim

If an injury permanently limits your ability to perform your job — a construction worker who can no longer lift the same weight, for example — the loss extends beyond the days you missed. This is usually calculated with the help of a vocational expert or economist who compares your pre-injury earning trajectory to your realistic post-injury earning trajectory, then projects the difference over your remaining working years. This is one of the scenarios where bringing in an attorney tends to pay for itself, since these figures are rarely something an insurer accepts at face value from a claimant alone.

Common Mistakes That Shrink a Lost Wage Claim

• Not reporting missed self-employment income because it feels harder to prove — it’s still a real, compensable loss.
• Returning to work early against medical advice, which can be read by an adjuster as evidence the injury wasn’t severe enough to justify the time already missed.
• Forgetting to include missed overtime, bonuses tied to attendance, or shift-differential pay that a base hourly rate doesn’t capture.

Frequently Asked Questions

This article is educational only and not legal or tax advice. Consult a licensed attorney or accountant about your specific situation.