Have a Tax Question? Ask a Tax Expert
To determine if settlement amounts you receive by compromise or judgment must be included in your income, you must consider the item that the settlement replaces.
Do not include in your income compensatory damages for personal physical injury or physical sickness (whether received in a lump sum or installments).
That compensation specifically EXCLUDED from gross income for income tax purposes.
So far - the compensatory payment you are about to receive - will NOT be taxable and will NOT be reported on your tax return.