I settled a lawsuit against a neighbor who slandered me. Do I have to pay federal income taxes on the money I received?
Probably, but check with your tax advisor. Under current law, money received in cases arising from personal injuries or death do not have to be included on your federal income tax form. These amounts are excluded from gross income because they arise from a physical injury. This is so even if there is a "pain and suffering" component to claim for physical injury or death.
Damages recovered for slander and libel usually do not involve physical injury and thus probably do need to be included on a tax return. Please check with your tax advisor. He or she will be better able to give you accurate advice after hearing all of the relevant facts concerning your case.