Will I be taxed on a lump sum payment from the state (OK) for proximity damages and easement on my land/dwelling from a road widening project? They sent me a 1099-s.

No.  The money on the 1099-S is not taxable.  Please see TurboTax Expert JamesG1 solution below.

 

"You still have to deal with the 1099 that was reported to the IRS.  Report the income, then immediately report a minus entry for the same amount.  Reference both entries as 'right of way sold - basis adjustment'.

 

Follow the steps below to report this income that is not reported as self-employment income.

 

1. Select Federal from the left side of the screen.
2. Select Wages & Income on the left side of the screen.
3. Scroll down to Less Common Income.  Click the down arrow.
4. Click Start / Revisit to the right of Miscellaneous income….
5. Click Start / Revisit to the right of Other reportable income.
6. At the screen Other Taxable Income enter the description of the income.
7. Click Add another Miscellaneous income Item and enter the reversing entry.

The income will be listed on line 8z of the Schedule 1 Additional Income and Adjustments to Income and line 8 of the Federal 1040 tax return."

 

View TurboTax Expert JamesG1 original solution here.