The ACT college entrance exam is often a requirement for admission, especially in the Midwest and Southern states. Although the federal government tries to promote higher education through tax breaks, you won't be able to write off ACT testing costs. You can, however, receive a reduced ACT testing fee and higher education tax breaks to pay for college.
As of 2010, the IRS does not allow taxpayers to deduct fees for college entrance exams like the ACT. You can only write off college expenses when they are required by the institution or are a qualified educational expense. In general, only tuition and fees meet this criteria. Also, since the ACT is taken before college, it is never a true college expense.
You may be able to receive a fee waiver for the ACT test if you can prove you have an economic hardship, such as a family income below the poverty line, and are a junior or senior in high school. Each high school makes a decision on an ACT fee waiver. Also, you can only receive a fee waiver twice and it only applies to the basic test fee. Extra services, such as late registration, do not qualify for a fee waiver.
College Tax Deductions
Once you receive admittance to a college, you can start tax planning. The IRS has several tax deductions, so almost anyone in college can take one. The American Opportunity credit is worth up to $4,000 -- so it reduces your tax bill by $4,000 if you qualify for the entire amount. Alternatively, you could take the Lifetime credit worth up to 20 percent of your tuition or $2,000, or deduct up to $4,000 in expenses with the tuition tax deduction. You can only take one college take break each year.
Review the admissions requirements for your top college choices. Some schools do not require applicants to take the ACT or SAT, or may ignore standardized test scores if you attain a certain GPA in college. If you take a college tax break, you must claim it on IRS Form 8863. Also, you can only claim costs you pay yourself, not those you paid with grants or scholarships.