I tried adding the code above before and it never worked. I just took a look at this again and got it to work. I copied some code right from the subcategories.tpl and put it below the <h1>{$current_category.category}</h1> section. See below. I also took out the x and y coordinates.
<h1>{$current_category.category}</h1>
<img class="subcategory-image" src="{$current_category.icon_url|amp}" alt="{$current_category.category|escape}"{if $current_category.image_x} width="{$current_category.image}"{/if}{if $current_category.image} height="{$current_category.image_y}"{/if} />