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In that case, you'd report the medical expenses related to the incident as miscellaneous (other) income. Punitive damages are taxable except in certain wrongful death cases, as are awards for employment discrimination and injury to reputation (libel, slander, defamation, etc.).
Compensation for Physical Injury is Not Taxable. As a general rule, the proceeds received from most personal injury claims are not taxable under either federal or state law. It does not matter whether you settled the case before or after filing a lawsuit in court. It doesnât matter if you went to trial and won a verdict.