The details of the damage award are important to the tax treatment. You may wish to see a tax attorney to review the details of your judgment. In particular, it would be important to know what the underlying claim was (damages for personal injury, wrongful termination, employment discrimination, property damage, etc.) and whether the punitive damages were specifically listed separately as punitive damages (e.g. two amounts listed, one for the compensatory damages and one for punitive damages). In most cases, if they are separately listed as punitive damages, they'd simply go on the return as miscellaneous income.
