That depends on what makes up the settlement.
The part of the settlement that covers economic losses you suffered, such as medical expense, burial, funeral, and loss of earnings and financial support, are not taxable to you by the Federal government. You will need to check with your state as to whether or not such compensation is taxable by them.
IF you took tax deductions on your tax return for any of the expenses above that would be considered tax deductible, those amounts will be taxable income.
For the rest of the settlement that is not covering economic losses – awards that are to compensate for other losses suffered - are taxable income to the recipient.
Those amounts include:
For information on how to enter taxable settlements, please look at the information below: