The health coverage tax credit is available to certain individuals who receive a pension benefit from the Pension Benefit Guaranty Corporation (PBGC) or are eligible trade adjustment assistance (TAA) recipients or eligible alternative trade adjustment assistance (alternative TAA) recipients.taxmap/pubs/p502-012.htm#en_us_publink100014971
You can take this credit for any month in which all of the following were true on the first day of the month.
- You were an eligible:
- Trade adjustment assistance (TAA) recipient,
- Alternative TAA recipient, or
- Pension Benefit Guaranty Corporation (PBGC) pension recipient.
- You paid the premium for qualified health insurance coverage for yourself. See Qualified Health Insurance, later.
- You were not imprisoned under federal, state, or local authority.
- You did not have other specified coverage. See Other Specified Coverage, later.
You cannot take this credit if you can be claimed as an exemption on someone else's tax return. taxmap/pubs/p502-012.htm#en_us_publink100014973
You were an eligible TAA recipient on the first day of the month if, for any day in that month or the prior month, you:
- Received a trade readjustment allowance, or
- Would have been entitled to receive such an allowance except that you had not exhausted all rights to any unemployment insurance (except additional compensation that is funded by a state and is not reimbursed from any federal funds) to which you were entitled (or would be entitled if you applied).
You received a trade readjustment allowance for January 2008. You were an eligible TAA recipient on the first day of January and February.taxmap/pubs/p502-012.htm#en_us_publink100014975
You were an eligible alternative TAA recipient on the first day of the month if, for that month or the prior month, you received benefits under an alternative trade adjustment assistance program for older workers established by the Department of Labor. taxmap/pubs/p502-012.htm#en_us_publink100014976
You received benefits under an alternative trade adjustment assistance program for older workers for October 2008. The program was established by the Department of Labor. You were an eligible alternative TAA recipient on the first day of October and November.taxmap/pubs/p502-012.htm#en_us_publink100014977
If you are an eligible alternative TAA recipient, you are eligible for this credit for a period up to 2 years if you:
- Are covered by a qualifying certification,
- Are reemployed not more than 26 weeks after the date of separation from the adversely affected employment,
- Are at least 50 years of age,
- Do not earn more than $50,000 a year in wages from reemployment,
- Are employed on a full-time basis, and
- Do not return to the employment from which you were separated.
You were an eligible PBGC pension recipient on the first day of the month, if both of the following apply.
- You were age 55 or older on the first day of the month.
- You received a benefit for that month that was paid by the PBGC under title IV of the Employee Retirement Income Security Act of 1974 (ERISA).
Item (2) above will also apply if you received a lump-sum payment from the PBGC after August 5, 2002, for any month that you would have received a PBGC benefit if you had not received a lump-sum payment. taxmap/pubs/p502-012.htm#en_us_publink100014980
You can include the premiums you pay for qualified health insurance for qualifying family members in figuring your credit. A qualifying family member is:
However, anyone who has other specified coverage (defined later), is not a qualifying family member.
Your spouse is not treated as a qualifying family member if your filing status is married filing separately and either (1) or (2) below applies.
- Your spouse was an eligible TAA recipient, alternative TAA recipient, or PBGC pension recipient during the year.
- All of the following apply:
- You lived apart from your spouse during the last 6 months of the year.
- A qualifying family member (other than your spouse) lived in your home for more than half the year.
- You provided over half the cost of keeping up your home.
For purposes of this credit, you are not considered married on the last day of the year if all of the following apply.
- You file a separate return.
- Your home is the home for more than half the year of a dependent under age 13 or a dependent who is physically or mentally not able to care for himself or herself.
- You pay more than half the cost of keeping up your home for the year.
- Your spouse does not live in your home for the last 6 months of the year.
You are not considered married if you are legally separated from your spouse under a decree of divorce or separate maintenance. You can claim the credit on a separate return.taxmap/pubs/p502-012.htm#en_us_publink100014984
You may be able to take the credit based on amounts paid for qualified health insurance expenses of your child even if the child is not your dependent. If your child is not your dependent, he or she is a qualifying family member only if all of the following apply.
- The parents are divorced or legally separated or lived apart at all times during the last 6 months of the year.
- The child received over half of his or her support for the year from the parents (without regard to the rules on multiple support agreements). See the discussion of multiple support agreements at Support claimed under a multiple support agreement earlier under Whose Medical Expenses Can You Include.
- The child is in custody of one or both of the parents for more than half of the year.
- A decree of divorce or separate maintenance or written separation agreement that applies to 2008 provides that (a) the noncustodial parent can claim the exemption for the child, or (b) the custodial parent will sign a written declaration that he or she will not claim the child as a dependent for 2008. If the divorce or separation agreement went into effect before 1985, this requirement is met if the noncustodial parent provides at least $600 for the support of the child for the year.
The noncustodial parent is the parent with whom the child lived for the lesser portion of the year.
If this exception applies, the other parent cannot treat the child as a qualifying family member for purposes of the HCTC, even though that parent claims the child as a dependent.
If you can treat the child as a qualifying family member for purposes of the HCTC, even though you do not claim the child as your dependent, the child must also meet all of the other conditions of a qualifying family member.taxmap/pubs/p502-012.htm#en_us_publink100014985
The following health insurance qualifies for the credit.
- COBRA continuation coverage. (This is coverage that employers with 20 or more employees must offer to employees or former employees and their beneficiaries who have lost coverage because of certain events.)
- Coverage under a group health plan that is available through the employment of your spouse. (But see Other Specified Coverage, later.)
- Coverage under an individual health insurance policy if you were covered during the entire 30-day period that ends on the date you separated from the employment which qualified you for the allowance or benefit as an eligible individual (defined earlier). For this purpose, coverage under an individual health insurance policy includes medical insurance offered to individuals and their families, but does not include coverage under a federal, state, or other group health insurance policy.
The following health insurance qualifies for the credit to the extent the sponsoring state elects to have it apply.
- State-based continuation coverage provided by the state under a state law that requires such coverage.
- Coverage offered through a qualified state high-risk pool.
- Coverage under a health insurance program offered to state employees or a similar state-based health insurance program.
- Coverage through an arrangement entered into by the state and a group health plan, an issuer of health insurance coverage, an administrator, or an employer.
- Coverage offered through a state arrangement with a private sector health care coverage purchasing pool.
- Coverage under a state-operated health plan that does not receive any federal financial participation.
To find out which plans are qualified for your state, you can:
- Visit the website, www.irs.gov, type "hctc: list of state-qualified health plans" in the search box, click on "search," and then, click on HCTC: List of State-Qualified Health Plans, or
- You can call 1-866-628-4282 (tollfree) (or TDD/TTY 1-866-626-4282).
The following health insurance does not qualify for the credit.
- Medicare supplemental (Medigap) insurance, Tricare supplemental insurance, or similar supplemental insurance to an employer-sponsored group health plan.
- Any insurance if substantially all of the coverage is:
- Coverage for on-site medical clinics,
- Hospital indemnity or other fixed indemnity insurance,
- Accident or disability income insurance (or a combination of the two),
- Liability insurance,
- A supplement to liability insurance,
- Workers' compensation or similar insurance,
- Automobile medical payment insurance,
- Credit-only insurance,
- Limited scope dental or vision benefits,
- Benefits for long-term care, nursing home care, home health care, community-based care (or any combination), or
- Coverage for only a specified disease or illness.
- Coverage under a flexible spending or similar arrangement.
If you have qualified health insurance that covers anyone besides yourself and your qualifying family member(s), (defined earlier), you may not be able to take into account all of your payments. You cannot treat an amount as paid for insurance for yourself and qualifying family members unless all of the following requirements are met.
- The charge for insurance for yourself and qualifying family members is either separately stated in the contract or furnished to you by the insurance company in a separate statement.
- The amount you paid for insurance for yourself and qualifying family members is not more than the charge that is stated in the contract or furnished by the insurance company.
- The amount stated in the contract or furnished by the insurance company is not unreasonably large in relation to the total charges under the contract.
Eligibility for the credit is determined on a monthly basis. An eligible coverage month is any month in which, as of the first day of the month, you:
- Are an eligible TAA recipient, eligible alternative TAA recipient, or eligible PBGC recipient (see TAA Recipient, Alternative TAA Recipient, or PBGC Pension Recipient earlier),
- Are covered by qualified health insurance (defined earlier) that you pay for,
- Do not have other specified coverage (defined later), and
- Are not imprisoned under federal, state, or local authority.
If you file a joint return, only one spouse has to satisfy the requirements.
Even if you are otherwise eligible, you are not eligible for the credit for a month if, as of the first day of the month, you have other specified coverage. Other specified coverage is coverage under the following.
- Any insurance which constitutes medical care (unless substantially all of that insurance is for benefits listed earlier under (1) or (2) under Nonqualified Health Insurance) if at least 50% of the cost of the coverage is paid by an employer (or former employer) of you or your spouse.
- Any of the following government health programs:
- Medicare Part A or Part B,
- Medicaid, or the State Children's Health Insurance Program (SCHIP),
- The Federal Employees Health Benefit Plan (FEHBP), or
- Tricare, the medical and dental care program for members and certain former members of the uniformed services and their dependents.
Entitlement to or receipt of benefits from the Veterans Administration is not other specified coverage.
Two important points here are that you are not entitled to the credit for a month, if on the first day of that month, you are either:
- Covered by Medicare, or
- Covered by a group health plan available through your or your spouse's employer and the employer contributes 50% or more of the premium.
To claim the credit, complete Form 8885, and attach it to your Form 1040; Form 1040NR, U.S. Nonresident Alien Income Tax Return; Form 1040-SS, U.S. Self-Employment Tax Return; or Form 1040-PR, Planilla para la Declaración de la Contribución Federal sobre al Trabajo por Cuenta Propia. You cannot claim the credit on Form 1040A, Form 1040EZ, or Form 1040NR-EZ, U.S. Income Tax Return for Certain Nonresident Aliens With No Dependents.taxmap/pubs/p502-012.htm#en_us_publink100014994
You must attach to your tax return the documents listed below.taxmap/pubs/p502-012.htm#en_us_publink100014995
For all health plans you must include both of the following.
- A copy of your health insurance bills or COBRA payment coupons. The bills must have:
- Your name,
- The name of your health plan,
- Your monthly premium amount,
- Dates of coverage, and
- Your health plan identification number.
- Proof of payment, such as:
- Canceled checks,
- Bank statements, or
- Credit card statements.
You must include the information listed above under All health plans
and one of the following documents.
- A copy of your completed and signed COBRA Election Letter. It may also be called a COBRA Enrollment Form, Application Form, Enrollment Application for Continuing Coverage, or Election Agreement.
- A letter from your former employer or COBRA administrator saying you have COBRA coverage. The letter must have:
- The COBRA coverage start and end dates,
- Name of the health plan,
- Your home address, and
- Covered family members, their dates of birth, their relationship to you, and their social security numbers.
- A copy of "Notice of Rights to Continue Coverage." Your former employer should have provided you with a copy of this notice.
You must include the information listed above under All health plans
and both of the following documents.
- A letter or other document from your former employer or your unemployment office that shows the date you left your job.
- A document from your health plan that shows your first date of coverage. Your first day of coverage in a non-group (individual) health plan must have been at least 30 days before you left your job.
You must include the information listed earlier under All health plans
and the following documents.
- Copies of paycheck stubs showing the health coverage deductions for the qualified months.
- A letter or other statement from your spouse's employer that states the employer contributed less than 50% of the cost of the coverage.
If you e-file, you must attach a copy of the required documents to Form 8453, U.S. Individual Income Tax Transmittal for an IRS e-file Return.taxmap/pubs/p502-012.htm#en_us_publink100015000
If you claim this credit, you cannot take the same expenses that you use to figure your health coverage tax credit into account in determining your:
- Medical and dental expenses on Schedule A (Form 1040), or
- Self-employed health insurance deduction.
You cannot use payments out of the following distributions to figure the credit:
- Health Savings Accounts (HSAs), or
- Archer Medical Savings Accounts (MSAs).
The HCTC credit is refundable. You can claim the full credit even if you do not owe any taxes or earn any income. To get the credit, you must:
- Qualify for the credit, and
- File a tax return, even if you:
- Do not owe any tax,
- Did not earn enough money to file a return, or
- Did not have income taxes withheld from your pay.
See How To Report
earlier for instructions on how to claim this credit.
You can either take this credit on your tax return or have it paid on your behalf in advance to your insurance company. Your payments and any payments paid on your behalf in advance are treated as having been made on the first day of the month for which they are made.
You can get your credit in advance by calling the HCTC customer contact center at 1-866-628-4282 (tollfree) (or TDD/TTY 1-866-626-4282) to register. The Treasury Department will pay your insurer 65% of your health insurance premiums as you pay the remaining 35%.