I received a settlement for a sexual harassment claim. Is it taxable?

It depends. Damages received on account of a personal injury that isn’t a physical personal injury are fully includible in gross income. Only compensatory damages for personal physical injury are tax free. Punitive damages are always taxable. Sexual harassment may not necessarily involve any physical injury. Physical ailments resulting from sexual harassment, including emotional distress, may not be sufficient to permit tax-free treatment of a recovery. Bottom line: It depends on the circumstances and what the settlement (and Form 1099-MISC) details. Discuss this with a knowledgeable tax adviser.