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Hi from just answer. I'm PDtax.
The injury settlement will be tax free unless you deducted any of the medical expenses you incurred.
Your case is indirect medical, so I went to review the tax treatment.
"A personal injury settlement with a monetary award based partially on emotional distress or mental anguishmay be tax-free. If the emotional distress or mental anguish is directly related to a physical injury or physical sickness, it is considered "medical" and, therefore, non-taxable."
http://www.alllaw.com/articles/nolo/personal-injury/settlement-tax-liability.html is the cite for that quote.
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