You got a check from a legal settlement—perhaps from a personal injury lawsuit, a wrongful termination case, or a vehicle accident. You got a settlement from your insurance company, or an exit check from your former employer. Are those payouts taxable?
The general rule regarding taxability of amounts received from the settlement of lawsuits and other legal remedies is Internal Revenue Code (IRC) Section 61. This section states that all income is taxable regardless of its source, unless exempted by another section of the code.