You might receive settlement funds, money paid to resolve a legal dispute, for a personal injury claim, workers’ compensation, or medical malpractice. While a settlement can help replace lost income and recover damages, it may also be taxable. Here’s what you need to know to avoid a huge tax bill on your settlement money. Understanding the different types of settlements The type of settlement you receive can significantly impact how it’s taxed. The Internal Revenue Service (IRS) groups awards into thr ...