For the most part, no. The Internal Revenue Service doesn’t consider compensation received for personal injuries as income, and does not, therefore, tax them. It makes an exception, however, when it comes to punitive damages. Punitive damages are a payment that is awarded not for the expenses and impacts you incurred from the injury, but to punish the defendant for particularly reckless behavior. Because these damages are not compensation for harm done to you, this portion of a defective product award can be taxed.
Gabriel Levin, Fort Lauderdale Product Liability Lawyer