text: I'm pretty sure you do. Here's an article that sums it up:\nhttp://www.ssd.com/publications/pub_detail.aspx?pubid=9195\nOne quote highlighted there: "Under this rule, damages for pain and suffering, emotional distress, and punitive or exemplary damages are taxable."\nHowever, you may be able to deduct the attorney fees - the cut your lawyer took from your settlement. If that hasn't already been taken into account you might walk away with a little money.