If you do not take a tax deduction for that income, you do not need to include it with your income, as it is not taxable. So, if you take the standard deduction, you do not need to include it.
Tax Benefit Rule - if an amount (as of a loss) used as a deduction in a prior taxable year is recovered in a later year it must be included in the gross income for the later year to the extent of the original deduction.
Note: If the amount of the loss was not taken as a deduction in the year the loss occurred, the recovered amount is not counted as income. @Grace55
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