In most cases, no, the amount you receive from the purchasing company will not be taxed. However, some exceptions apply. According to the IRS, compensation for lost wages in cases of discrimination, emotional distress absent of physical injury or illness, and punitive damages may be taxed. The IRS also states that “interest on any settlement is generally taxable as ‘Interest Income’ and should be reported on line 2b of Form 1040.” Taxable structured settlements are rare, but before you sell your payments, review the terms of your contract with your attorney.