College Preparation Tax Credit Act of 2016

To amend the Internal Revenue Code of 1986 to provide a tax credit for certain expenses relating to applying to college. 1. Short title This Act may be cited as the College Preparation Tax Credit Act of 2016 2. Tax credit for college preparation expenses (a) In general Subpart A of part IV of subchapter A of chapter 1 25E. Credit for college preparation expenses (a) Allowance of credit In the case of an individual, there shall be allowed as a credit against the tax imposed by this chapter for such taxable year an amount equal to so much of the qualified college preparation expenses paid or incurred by the taxpayer during such taxable year as does not exceed $500. (b) Qualified college preparation expenses For purposes of this section, the term qualified college preparation expenses (1) fees required for taking any Advanced Placement or International Baccalaureate exam, (2) fees required for taking the SAT, the ACT, or any SAT Subject Test, (3) expenses related to preparation (including tutorial services and preparation classes) for any exam described in paragraph (1) or (2), (4) fees and expenses related to applications for admission to pursue a postsecondary course of study at an eligible educational institution (as defined in section 25A(f)(2)), and (5) such other similar expenses and fees as the Secretary may by regulation prescribe. (c) Election No credit shall be allowed under subsection (a) with respect to any expenses paid or incurred during the taxable year with respect to any individual for whom an election is not in effect under this section for such taxable year. (d) Credit allowed only for 3 taxable years An election under this section with respect to any individual may not be made for any taxable year if such an election is in effect with respect to such individual for any 3 prior taxable years. (e) Treatment of expenses paid by dependent If a deduction under section 151 with respect to an individual is allowed to another taxpayer for a taxable year beginning in the calendar year in which such individual’s taxable year begins— (1) no credit shall be allowed under subsection (a) to such individual for such individual’s taxable year, and (2) qualified college preparation expenses paid by such individual during such individual’s taxable year shall be treated for purposes of this section as paid by such other taxpayer. . (b) Clerical amendment The table of sections for subpart A of part IV of subchapter A of chapter 1 Sec. 25E. Credit for college preparation expenses. . (c) Effective date The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.

Summary: College Preparation Tax Credit Act of 2016 This bill amends the Internal Revenue Code to allow an individual taxpayer a tax credit for up to $500 of qualified college preparation expenses. An individual may use the credit for up to three years for qualified college preparation expenses that include: the fees required for taking any Advanced Placement or International Baccalaureate exam, the SAT, the ACT, or any SAT subject test; expenses related to preparation for the exams; fees and expenses related to applications for admission to pursue a postsecondary course of study at an institution of higher education; and similar expenses and fees prescribed by the Internal Revenue Service in regulations.