The claim that you had against your employer was for a wrongful discharge issue, and the settlement that you received was due to the wrongful discharge. It has nothing to do with your medical issues, even though that may be the reason the discharge occured.
This settlement would be fully taxable to you, however, the rate of tax that you would pay will depend on your total other taxable income for the year, as it is your total taxable income that determines the tax bracket that you are in.
If you are filing a joint return with your husband and if this is the only taxable income you would have for the year, you will owe approximately 15% in federal taxes and 4.35% for MI state taxes.
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Thank you cat
Hello again catj,
If the only other income you have is from your disability checks, then you will owe 15% federal tax on this settlement plus 4.35% MI state taxes.
Thank you cat and let me know if you have more questions.