Check the tax site I linked to the prior post.
It short, it depends on the court (how they phrased it).
That said "rehabilitation" is more like partial recovery of a temporary lost or misplaced (by the custodian) property, but tax aficionados may differ on this.

The following categories of settlement proceeds are typically not taxable:
Physical Injury: Payouts from personal injury claims, like car accidents or wrongful death lawsuits, are tax-free. This includes medical treatment costs and lost wages.
Emotional Distress (Physical Injuries): If the physical injury settlement award includes damages for emotional distress, those funds are also nontaxable—again, as long as they are directly related to a physical injury that you sustained.
Physical Sickness: Settlements related to physical symptoms, like chemical exposure that causes illness and medical expenses, are nontaxable.
Medical Expenses: Lawsuit settlements for medical expenses are nontaxable, unless you previously deducted those expenses on your taxes. You can’t take the same tax break twice.
Taxable Settlement Proceeds

The following categories of settlement proceeds are typically taxable:
Non-Physical Lawsuits: In general, any non-physical lawsuit settlement is taxable. This includes wrongful termination suits, libel, property damage, discrimination lawsuits, and more.
Emotional Distress (Non-Physical): Emotional distress damages that do not involve a physical injury (for example, a wrongful termination, sexual harassment, or defamation) are taxable.
Lost Wages and Back Pay (Non-Physical): Any wages awarded count as taxable income, again unless they were the result of a physical injury. In addition, these wages are subject to Social Security and Medicare taxes as well.
Pre- or Post-Judgment Interest: Interest on the settlement is taxable.
Punitive Damages: Punitive damages are sometimes awarded to punish a defendant, rather than compensate victims for specific losses (such as medical bills, lost wages, or pain and suffering). The defendant pays punitive damages if they’ve done something grossly negligent, reckless, or malicious. Punitive damages are always taxable, even if they are part of a personal injury settlement.
Legal Fees and Attorney Fees: If your settlement is taxable, you still owe taxes on the full amount of the settlement—before legal fees and attorney fees have been deducted. This means you will technically pay taxes on your legal fees and attorney fees.