It depends on the type of settlement proceeds you received and what they represented. If you received punitive damages, this would be taxable income, and often a Form 1099 would be issued.
Property settlements for loss in value of property that are less than the adjusted basis of your property are not taxable and generally do not need to be reported on your tax return. However, you must reduce your basis in the property by the amount of the settlement. If the property settlement exceeds your adjusted basis in the property, the excess is income.
For example, if you paid $10,000 for your property, and you received $5,000 in recognition of the decrease in value or to pay for repairs to settle your claim, the amount isn't taxable. If instead, you received $20,000 and $10,000 of it was punitive damages, the $10,000 excess over your basis would be taxable.
See IRS Publication 4345 for more information.
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