Damages

Damages means:
the amount received (other than workers' compensation) through prosecution of a legal suit or action based on tort or tort-type rights, or through a settlement agreement entered into in lieu of such prosecution. Reimbursement for loss of income or recovery of previously deducted expenses is normally taxable. Damage income for personal injuries or sickness is generally not taxable. Punitive damages are includable in taxable income unless they arise out of physical sickness or physical injury.

See also other Tax Terms and Definitions in U.S.A.

Former IRC (check if this IRC provision is current here) §104.

If the taxpayer receive a settlement in a personal injury damage lawsuit that includes money for future medical expenses, the amount is not taxable. But neither can the taxpayer deduct those future medical expenses covered by the amount of the award allocated to medical care.

U.S. and other Developed Countries International Tax Meaning

The amount received (other than worker's compensation) through prosecution of a legal suit or action based on tort or tort-type rights, or through a settlement agreement entered into in lieu of such prosecution.

International Tax Law.