The advice I received was as follows: for tax planning and personal budgeting purposes, start from the assumption that the entire settlement/award will be taxed as income. When you receive the check, set aside city+state+fed taxes at your highest tax bracket. If the award is big enough to justify it, talk with an expert since portions may not be taxable either federally or in some states. If the amount is too small to justify paying an accountant (mine was), probably better to simply treat it as income on your taxes.