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taxmap/pubs/p502-013.htm#en_us_publink1000179153

Health Coverage Tax Credit(p25)


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If you paid the premiums for qualified health insurance coverage, you may be able to claim the health coverage tax credit (HCTC). If you are eligible, you can get monthly HCTC (advance payments), a yearly HCTC, or a combination of these methods (see How To Take the Credit, later). For 2009, the HCTC is 65% of the premiums paid for coverage in January through April, and 80% of the premiums paid for coverage in May through December. For 2010, the HCTC is 80% of the premiums paid for coverage in each month.
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More information.(p25)


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For a complete discussion of the HCTC, visit our website www.irs.gov and enter "hctc" in the search box. Also, see Form 8885.
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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, Reemployment TAA recipient, or
    3. Pension Benefit Guaranty Corporation (PBGC) pension recipient.
  2. You paid the premium for qualified health insurance coverage for yourself or a qualifying family member. 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.
If you were an eligible recipient described in (1), your state’s workforce agency (unemployment office) or the PBGC will notify the HCTC Program that you may be eligible for the credit. When notified, the HCTC Program will mail you an HCTC Program Kit. If you have not received the Program Kit, you probably are not an eligible recipient and do not qualify for the credit.
EIC
It can take the state or PBGC time to notify the HCTC Program about the event. You should make the full premium payments to your health plan until you are enrolled in the HCTC Program. You may be able to claim the yearly HCTC for these premiums when you file your tax return.
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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.
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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.
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Both spouses eligible.(p25)


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Your spouse is not treated as a qualifying family member if:
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Married and living apart.(p25)
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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.
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Legally separated.(p25)
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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.
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Children of divorced or separated parents.(p25)


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Under the rules for medical expenses, a child of divorced or separated parents can be treated as a dependent of both parents if certain requirements are met. See Qualifying Child under Whose Medical Expenses Can You Include, earlier. However, for purposes of the HCTC, only the custodial parent can treat the child as a qualifying family member, even if the other parent can claim the child as a dependent. The custodial parent is the parent having custody for the greater portion of the tax year.
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Qualified Health Insurance(p25)


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Qualified Health Insurance

The following health insurance qualifies for the credit.
EIC
COBRA continuation coverage allows individuals who had lost their jobs to receive a reduction in health insurance premiums. You do not qualify for the HCTC for any month that you received a reduction in premium.
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State-qualified health insurance.(p26)


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Certain state qualified health insurance can qualify for a credit. To find out which plans are qualified for your state, you can:
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Nonqualified Health Insurance(p26)


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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.
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Insurance that covers other individuals.(p26)


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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.
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Eligible Coverage Month(p26)


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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 recipient,
  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.
An individual who receives COBRA premium assistance (discussed earlier) for a month is disqualified from receiving the HCTC for that month.
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Other Specified Coverage(p26)


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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.
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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.
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How To Take the Credit(p27)


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If you claim this credit, you cannot take the same expenses that you use to figure your HCTC into account in determining your:
You cannot use payments out of the following distributions to figure the credit:
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Yearly HCTC(p27)


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Yearly HCTC

To claim the yearly HCTC, 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.
You may claim the yearly HCTC if you were an eligible recipient and:
For 2009, the yearly credit is 65% of the premium paid for coverage in January through April and 80% for coverage in May through December. For 2010, the yearly credit is 80%. You cannot claim the credit for amounts you paid to the HCTC Program.
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Example.(p27)

You became eligible for the HCTC on June 1, 2009. You enrolled in a state-qualified health plan and registered for advance payments in June. You paid the premiums for the first 2 months to the health plan. You receive your first HCTC invoice for the amount due at the end of July (for August coverage). You begin paying the HCTC Program at that time. You may claim the yearly HCTC for the payments you made directly to the health plan during enrollment in the HCTC or request a reimbursement for the monthly HCTC (or advanced payment). The reimbursement for the monthly HCTC will appear as a credit on your monthly HCTC invoice.
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Required documents.(p27)


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You must attach to your tax return the documents listed in the Form 8885 instructions.
If you e-file, you must attach a copy of Form 8885 and the required documents to Form 8453, U.S. Individual Income Tax Transmittal for an IRS e-file Return. Mail Form 8453 and the attachments to the address shown in the Form 8453 instructions.
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Refundable credit.(p27)


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The HCTC 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.
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Monthly HCTC(p27)


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Monthly HCTC

Under monthly HCTC (advance payments), you only pay part of the premium for health insurance and the HCTC Program pays the rest of the premium. The part paid by the HCTC Program is your monthly HCTC. For January through April of 2009, you had to pay 35% of the premium and the HCTC Program paid 65% of the premium. For May through December of 2009, you had to pay 20% of the premium and the HCTC Program paid 80% of the premium. For 2010, you will have to pay 20% and the HCTC Program will pay 80% of the premium.
You pay your part of the premium to the HCTC Program. The program adds the advance payment and pays the total premium to your health plan.
If you were an eligible recipient, your state’s workforce agency (unemployment office) or the PBGC will notify the HCTC Program that you may be eligible for the credit. When notified, the HCTC Program will mail you an HCTC Program Kit. If you have not received the Program Kit, you probably are not an eligible recipient and do not qualify for the credit.
EIC
It can take the state or PBGC time to notify the HCTC Program about the event. You should make the full premium payment to your health plan until you are enrolled in the HCTC Program. You may be able to claim the yearly HCTC for these premiums.
When you get the HCTC Program Kit, you must fill out the registration form and send it and any supporting documents to the HCTC Program. Once you are enrolled in the HCTC Program, you will receive a monthly invoice stating the amount you must pay to the program and the due date.
For 2009 and 2010, the HCTC Program may reimburse HCTC participants for eligible coverage months for which they made payments directly to their health plans during the enrollment process. This payment must be reduced by any payment you received for the purchase of health insurance under a national emergency grant for the tax year including these eligible coverage months and for any premium amount paid for non eligible benefits, such as dental and vision expenses. Please see www.irs.gov, type "hctc reimbursement credit" in the search box for more information.
If you receive a monthly HCTC, you will get Form 1099-H, Health Coverage Tax Credit (HCTC) Advance Payments. The form shows you the total of your advance payments and for which months payments were made (including months for which retroactive payments were made). You cannot claim the yearly HCTC for any month for which you received a monthly HCTC.