In California, generally benefits under Workers' Compensation such as temporary disability benefits are exempt from federal, state or local income tax. Also you don't have to pay Social Security,...
Amounts you receive as workers' compensation for an occupational sickness or injury are fully exempt from tax if they are paid under a workers' compensation act or a statute in the nature of a...
Actually it's no, they are not taxable..
http://www.irs.gov/publications/p907/ar02.html#d0e206
Other Payments
You may receive other payments that are related to your disability.
The following...