What about if you took out money from your traditional IRA to pay for the deposit? I think that should count towards qualifying educational expense, so you don't have to pay the penalty charge.
The deposit you pay to secure a spot in class usually goes towards your first quarter/semester tuition, so to the extent you can deduct tuition (see our previous and extensive discussion on that) the deposit would count as part of that. I'm too lazy right now to look at the rules about IRA withdrawals so won't comment directly on that.
I 100% agree with nink that there's no conceivable way you could deduct the application fee and have it withstand a challenge by the feds. And let's face it, the $50 you save in taxes is just not worth the hassle of an audit.
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