"There is No Deduction for Income Tax" For Diminished Future Earning Capacity Awards
When Courts in BC assess damages for future ‘diminished earning capacity‘ no deduction is to be made for income taxes to be paid on those funds. Although this is not a new legal development, it is nice when Courts summarize the law in a concise statement as was done in reasons released this week by the BC Supreme Court, Vernon Registry.
In this week’s case (Kelly v. Kotz) the Plaintiff was awarded $16,000 for diminished earning capacity following injuries sustained in a vehicle collision. The basis of the award was that the Plaintiff needed to attend a rehabilitation program to address her injuries and this was an assessment of her anticipated lost earnings during this time. ICBC argued the award should be reduced by tax obligations. Madam Justice Hyslop rejected this argument and provided the following concise reasons:
 The burden of proof is whether there is a real and substantial possibility that the plaintiff will suffer a future loss of income. Ms. Kelly has met that burden. Ms. Kelly seeks $16,000.00 as a loss of wages while she pursues the program recommended by Dr. Brownlee. This future loss of income is based on Ms. Kelly’s annual income of $60,000.00 and benefits roughly estimated at $500.00 per month. Ms. Kelly will need to take three months off to attend this program; this is the basis of the loss.
 The defendants did not dispute these numbers, but disputed whether it should be a net amount as opposed to a gross amount.
 Past loss of income is a net amount after deduction of income tax. Future loss of earnings is an assessment and there is no deduction for income tax: Arnold v. Teno,  2 S.C.R. 287…
 I order that the plaintiff be awarded $16,000.00 for future loss of income.