Health Coverage Tax Credit(p27)

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). The HCTC is 72.5% of the payments made in 2012.

For a complete discussion of the HCTC, visit 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.

1. You were an eligible:
   1. Trade adjustment assistance (TAA) recipient,
   2. Alternative TAA recipient,
   3. Reemployment TAA recipient,
   4. Pension Benefit Guaranty Corporation (PBGC) pension payee, or
   5. You were a qualifying family member of an individual described in a, b, c, or d when he or she enrolled in Medicare, died, or got divorced. See Family members in certain life events (enrollment in Medicare, death, or divorce), later.
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 individual described in 1a, 1b, 1c, or 1d, 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 Eligibility Kit. If you have not received the Eligibility Kit, you may not be an eligible individual and not qualify for the credit. If you believe you are eligible for the HCTC and have not received an Eligibility Kit, go to IRS.gov and enter "HCTC" in the search box for information on how to contact the HCTC Program.

You cannot take this credit if you can be claimed as a dependent on someone else's tax return.

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 all of the following are true.

• You are married at the end of the year.
• You and your spouse are both eligible recipients during the year.
• 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.

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.

Qualifying family members (spouses and dependents) are considered recipients and are eligible to receive the HCTC in the event that the TAA, ATAA, RTAA recipient or PBGC payee enrolls in Medicare, dies, or gets divorced. Qualifying family members can receive the tax credit for up to 24 months from the month of the event, or until January 1, 2014, whichever comes first. Eligible taxpayers who plan to claim this credit because of these life events must call the HCTC Program prior to filing Form 8885 to ensure the form is processed correctly. See State-qualified health insurance, later, for the phone number.

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 below.
• Coverage under a group health plan that is available through the employment of your spouse. (But see Other Specified Coverage, later.)
• Coverage under a non-group (individual) health insurance plan, if the first day of your coverage started at least 30 days before you left your job that qualified you for TAA, ATAA, RTAA, or PBGC benefits, or the date of Medicare enrollment, death of or divorce from the original TAA recipient or PBGC payee that provided you with extended eligibility as a qualified family member. Individual health insurance does not include any insurance connected with a group health plan of federal or state based health insurance coverage.

A health plan purchased through a VEBA that was established through the bankruptcy of your former employer.

Certain state qualified health insurance can qualify for a credit. To find out which plans are qualified for your state, you can:

• Visit IRS.gov, and 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 TTY/TDD 1-866-626-4282).

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.

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:

1. Are an eligible recipient or a qualified family member in certain life events (defined 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.

An individual who receives COBRA premium assistance (discussed earlier) for a month is disqualified from receiving the HCTC for that month.

Even if you or your qualifying family member are otherwise eligible, you or your qualifying family member are not eligible for the credit for a month if, as of the first day of the month, you or your qualifying family member 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, B, or C,
   2. Medicaid, or the Children's Health Insurance Program (CHIP),
   3. The Federal Employees Health Benefit Program (FEHBP), or
   4. 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.

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 you made with funds from the following accounts to figure the credit:

• Health Savings Accounts (HSAs), or
• Archer Medical Savings Accounts (MSAs).

The HCTC is 72.5% for payments made in 2012. 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.

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.

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.

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.

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 want to receive the monthly HCTC, 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.

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 reimbursement credits were paid to you). You cannot claim the yearly HCTC for any month for which you received a monthly HCTC.