If I recently settled an out of court lawsuit against my Long Term Disability Insurance company, do I need to report this settlement as income?

 That depends on the original disability insurance plan. Legal settlements are taxable or not according to the kind of income they replaced. Disability insurance payouts are taxable if your employer paid the premiums for you tax free, but are not taxable if you paid the premiums after-tax.  In some cases, when an employer provides a basic level of protection and the employee pays for extra protection, then part of the payment is taxable and part is nontaxable, and this will usually be reflected on a 1099 form or W-2 form sent by the disability insurance company at the end of the year.

I am assuming that the insurance company denied your claim at first, and you have now settled that they should pay a disability claim to you. In that case, you have to go back and look at the original disability insurance plan and how it was paid for, to determine whether all, part, or none of the settlement is taxable.

 This may be reflected on a 1099 or W-2 form that the insurance company sends you in January, now that you have settled. If you get a form that seems to disagree with what you think the taxability of the payment should be, you can write back here for further information on how to adjust your tax return.