Q. Is it permissible to keep the $3,000 purely as taxable income without actually spending it?
A. Yes. It's that simple.
Q. If so, could this decision result in any tax penalties?
A. Theoretically, yes. If it resulted in high tax and you did not have sufficient withholding done, there could be an underpayment penalty. But that's unlikely, given the income situation of most students and the high standard deduction for earned income.
Scholarships are a hybrid between earned and unearned income. It is earned income for purposes of the $14,600 filing requirement (2024) and the dependent standard deduction calculation (earned income + $450 but not more than $14,600). It is not earned income for the kiddie tax and other purposes (e.g. EIC). For grad students and post grad fellows, scholarship, stipend and fellowship income is earned income ("compensation") for IRA contributions.
