Compensation settlements pertaining to personal injuries or illnesses are not taxable. However, any declared portions of accrued interest or punitive damages are fully taxable because they are treated as regular income.

Medical malpractice is defined as professional negligence - by act or omission - by a health care professional who deviates from the standard protocol of care, and therefore causes an injury or a patient's death. Standards and regulations of medical malpractice are different ...