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Generally, if your settlement is for personal physical injuries or physical sickness and you did not take an itemized deduction for medical expenses related to the injury or sickness in prior years, the full amount is non-taxable and you don't need to include it in your income. However, if part of your settlement is for medical expenses you deducted in a prior year, that portion may be taxable. You should receive a Form 1099 if any part of your settlement is taxable. If you're unsure about the specifics of your situation, it's a good idea to keep a detailed record of the settlement and consult with a tax professional.