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previous page Previous Page: Publication 502 - Medical and Dental Expenses - Health Insurance Costs for Self-Employed Persons
next page Next Page: Publication 502 - Medical and Dental Expenses - How To Get Tax Help
 Use previous pagenext page to find additional occurrences of topic items.Index for this Publication
taxmap/pubs/p502-012.htm#en_us_publink100014970

Health Coverage Tax Credit(p25)


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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

Who Can Take This Credit?(p25)


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You can take this credit for any month in which all of the following were true on the first day of the month.
  1. You were an eligible:
    1. Trade adjustment assistance (TAA) recipient,
    2. Alternative TAA recipient, or
    3. Pension Benefit Guaranty Corporation (PBGC) pension recipient.
  2. You paid the premium for qualified health insurance coverage for yourself. See Qualified Health Insurance, later.
  3. You were not imprisoned under federal, state, or local authority.
  4. You did not have other specified coverage. See Other Specified Coverage, later.
taxmap/pubs/p502-012.htm#en_us_publink100014972

No credit if exemption claimed by another taxpayer.(p25)


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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

TAA Recipient(p25)


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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:
taxmap/pubs/p502-012.htm#en_us_publink100014974

Example.(p25)

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

Alternative TAA Recipient(p25)


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previous topic occurrence Alternative TAA Recipient next topic occurrence

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

Example.(p25)

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

Alternative TAA workers.(p25)


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If you are an eligible alternative TAA recipient, you are eligible for this credit for a period up to 2 years if you:
  1. Are covered by a qualifying certification,
  2. Are reemployed not more than 26 weeks after the date of separation from the adversely affected employment,
  3. Are at least 50 years of age,
  4. Do not earn more than $50,000 a year in wages from reemployment,
  5. Are employed on a full-time basis, and
  6. Do not return to the employment from which you were separated.
taxmap/pubs/p502-012.htm#en_us_publink100014978

PBGC Pension Recipient(p25)


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previous topic occurrence Pension Benefit Guaranty Corporation next topic occurrence

You were an eligible PBGC pension recipient on the first day of the month, if both of the following apply.
  1. You were age 55 or older on the first day of the month.
  2. 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).
taxmap/pubs/p502-012.htm#en_us_publink100014979

Lump-sum payment.(p25)


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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

Qualifying Family Member(p25)


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Qualifying Family Member

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.
taxmap/pubs/p502-012.htm#en_us_publink100014981

Married persons filing separate returns.(p25)


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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.
  1. Your spouse was an eligible TAA recipient, alternative TAA recipient, or PBGC pension recipient during the year.
  2. All of the following apply:
    1. You lived apart from your spouse during the last 6 months of the year.
    2. A qualifying family member (other than your spouse) lived in your home for more than half the year.
    3. You provided over half the cost of keeping up your home.
taxmap/pubs/p502-012.htm#en_us_publink100014982

Married and living apart.(p26)
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For purposes of this credit, you are not considered married on the last day of the year if all of the following apply.
taxmap/pubs/p502-012.htm#en_us_publink100014983

Legally separated.(p26)
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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

Children of divorced parents.(p26)


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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 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

Qualified Health Insurance(p26)


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Qualified Health Insurance

The following health insurance qualifies for the credit.
taxmap/pubs/p502-012.htm#en_us_publink100014986

State-qualified health insurance.(p26)


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The following health insurance qualifies for the credit to the extent the sponsoring state elects to have it apply.
To find out which plans are qualified for your state, you can:
taxmap/pubs/p502-012.htm#en_us_publink100014987

Nonqualified Health Insurance(p27)


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Nonqualified Health Insurance

The following health insurance does not qualify for the credit.
  1. Medicare supplemental (Medigap) insurance, Tricare supplemental insurance, or similar supplemental insurance to an employer-sponsored group health plan.
  2. Any insurance if substantially all of the coverage is:
    1. Coverage for on-site medical clinics,
    2. Hospital indemnity or other fixed indemnity insurance,
    3. Accident or disability income insurance (or a combination of the two),
    4. Liability insurance,
    5. A supplement to liability insurance,
    6. Workers' compensation or similar insurance,
    7. Automobile medical payment insurance,
    8. Credit-only insurance,
    9. Limited scope dental or vision benefits,
    10. Benefits for long-term care, nursing home care, home health care, community-based care (or any combination), or
    11. Coverage for only a specified disease or illness.
  3. Coverage under a flexible spending or similar arrangement.
taxmap/pubs/p502-012.htm#en_us_publink100014988

Insurance that covers other individuals.(p27)


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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.
taxmap/pubs/p502-012.htm#en_us_publink100014989

Eligible Coverage Month(p27)


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Eligible Coverage Month

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:
  1. Are an eligible TAA recipient, eligible alternative TAA recipient, or eligible PBGC recipient (see TAA Recipient, Alternative TAA Recipient, or PBGC Pension Recipient earlier),
  2. Are covered by qualified health insurance (defined earlier) that you pay for,
  3. Do not have other specified coverage (defined later), and
  4. Are not imprisoned under federal, state, or local authority.
If you file a joint return, only one spouse has to satisfy the requirements.
taxmap/pubs/p502-012.htm#en_us_publink100014990

Other Specified Coverage(p27)


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Specified Coverage

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.
  1. 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.
  2. Any of the following government health programs:
    1. Medicare Part A or Part B,
    2. Medicaid, or the State Children's Health Insurance Program (SCHIP),
    3. The Federal Employees Health Benefit Plan (FEHBP), or
    4. Tricare, the medical and dental care program for members and certain former members of the uniformed services and their dependents.
taxmap/pubs/p502-012.htm#en_us_publink100014991

Benefits from the Veterans Administration.(p27)


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Entitlement to or receipt of benefits from the Veterans Administration is not other specified coverage.
EIC
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:
  1. Covered by Medicare, or
  2. Covered by a group health plan available through your or your spouse's employer and the employer contributes 50% or more of the premium.
taxmap/pubs/p502-012.htm#en_us_publink100014993

How To Report(p28)


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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

Required documents.(p28)


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You must attach to your tax return the documents listed below.
taxmap/pubs/p502-012.htm#en_us_publink100014995

All health plans.(p28)
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For all health plans you must include both of the following.
  1. A copy of your health insurance bills or COBRA payment coupons. The bills must have:
    1. Your name,
    2. The name of your health plan,
    3. Your monthly premium amount,
    4. Dates of coverage, and
    5. Your health plan identification number.
  2. Proof of payment, such as:
    1. Canceled checks,
    2. Bank statements, or
    3. Credit card statements.
taxmap/pubs/p502-012.htm#en_us_publink100014996

COBRA coverage.(p28)
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You must include the information listed above under All health plans and one of the following documents.
  1. 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.
  2. A letter from your former employer or COBRA administrator saying you have COBRA coverage. The letter must have:
    1. The COBRA coverage start and end dates,
    2. Name of the health plan,
    3. Your home address, and
    4. Covered family members, their dates of birth, their relationship to you, and their social security numbers.
  3. A copy of "Notice of Rights to Continue Coverage." Your former employer should have provided you with a copy of this notice.
taxmap/pubs/p502-012.htm#en_us_publink100014997

Non-group (individual) health plans.(p28)
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You must include the information listed above under All health plans and both of the following documents.
taxmap/pubs/p502-012.htm#en_us_publink100014998

Coverage through your spouse's employer.(p28)
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You must include the information listed earlier under All health plans and the following documents.
taxmap/pubs/p502-012.htm#en_us_publink100014999

E-filed return.(p28)
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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

No double benefit.(p28)


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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:
You cannot use payments out of the following distributions to figure the credit:
taxmap/pubs/p502-012.htm#en_us_publink100015001

Refundable Credit(p28)


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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:
  1. Qualify for the credit, and
  2. File a tax return, even if you:
    1. Do not owe any tax,
    2. Did not earn enough money to file a return, or
    3. Did not have income taxes withheld from your pay.
See How To Report earlier for instructions on how to claim this credit.
taxmap/pubs/p502-012.htm#en_us_publink100015002

Advance Payments(p29)


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Advance Payments

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%.
previous pagePrevious Page: Publication 502 - Medical and Dental Expenses - Health Insurance Costs for Self-Employed Persons
next pageNext Page: Publication 502 - Medical and Dental Expenses - How To Get Tax Help
 Use previous pagenext page to find additional occurrences of topic items.Index for this Publication