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.
For a complete discussion of the HCTC, visit our website www.irs.gov
and enter "hctc" in the search box. Also, see Form 8885.
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, Reemployment TAA recipient, or
- Pension Benefit Guaranty Corporation (PBGC) pension recipient.
- You paid the premium for qualified health insurance coverage for yourself or a qualifying family member. 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.
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.
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.
You cannot take this credit if you can be claimed as an exemption on someone else's tax return. taxmap/pubs/p502-013.htm#en_us_publink1000179165
You can include the premiums you pay for qualified health insurance for qualifying family members in figuring your credit. A qualifying family member is:
- Your spouse (but see Both spouses eligible below), or
- Anyone whom you can claim as a dependent on your tax return. (For children whose parents are divorced, see Children of divorced or separated parents, later.)
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:
- You are married at the end of the year,
- You and your spouse are both eligible recipients during the year, and
- You file separate tax returns.
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. taxmap/pubs/p502-013.htm#en_us_publink1000179171
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.
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.) See the caution on page 26.
- 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.
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.
Certain state qualified health insurance can qualify for a credit. To find out which plans are qualified for your state, you can:
- Visit the website, www.irs.gov, type "hctc" in the search box, 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 recipient,
- 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.
An individual who receives COBRA premium assistance (discussed earlier) for a month is disqualified from receiving the HCTC for that month.taxmap/pubs/p502-013.htm#en_us_publink1000179183
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.taxmap/pubs/p502-013.htm#en_us_publink1000179187
If you claim this credit, you cannot take the same expenses that you use to figure your HCTC 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).
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:
- Did not receive monthly HCTC (advanced payments), or
- Received advanced payments and also made eligible payments directly to your health plan.
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. taxmap/pubs/p502-013.htm#en_us_publink1000192211
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.taxmap/pubs/p502-013.htm#en_us_publink1000191991
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.taxmap/pubs/p502-013.htm#en_us_publink1000192206
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:
- 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.
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.
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.