Compensatory damages are intended to represent the closest possible financial equivalent of the loss or harm suffered by the plaintiff, to make the plaintiff whole again, to restore the plaintiff to the position the plaintiff was in before the tort occurred.
This is done with money. All losses must be translated into a dollar value to compensate the plaintiff.
Sometimes general damages are calculated using the "per diem" method, which says to multiply what such harm for a short period of time should be compensated for by the length of time that the plaintiff must endure the harm, i.e. their life expectancy.
Compensatory damages are not taxed, although a minority of jurisdictions award lost wages based on what the plaintiff's post-tax income would have been.