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A structured settlement is a financial or insurance arrangement whereby a claimant agrees to resolve a personal injury tort claim by receiving periodic payments on an agreed schedule rather than as a lump sum. purchaser of a structured settlement is an individual or company who buys a pre-existing structured settlement. Such settlements might include payouts for lottery winnings or annuities. For example, a court ordered structured settlement pays $5,000 a year for twenty years.
However, the amount you deduct cannot be more than the amount of the settlement you include as income for the tax year. Structured Settlements. A judgment award issued as a structured settlement annuity may, in fact, pay out a portion of tax-free income over the payout period.he amount you allocate as taxable can be reduced by: 1  Any amount you may have paid out for medical expenses attributed to emotional distress or mental anguish not previously deducted, and. 2  Previously deducted medical expenses for such distress and anguish that did not provide a tax benefit.