Health Coverage Credit
The Health Coverage Tax Credit (HCTC) is a federal tax credit
administered by the IRS that pays for 72.5% of qualified health
insurance premiums for eligible individuals. The HCTC can be
claimed yearly on an individual's federal income tax return, or on
a monthly basis by enrolling in the monthly HCTC program.
Who is Eligible?
There are three requirements to be eligible to claim the Health
Coverage Tax Credit. All three requirements must be met in order to
be eligible.
Requirement 1
You must be one of the following:
- A Pension Benefit Guaranty Corporation (PBGC) payee who is 55
years old or older.
- An eligible Trade Adjustment Assistance (TAA), Alternative TAA
(ATAA), or Reemployment TAA (RTAA) recipient. An eligible TAA
recipient is defined as someone who receives a Trade Readjustment
Allowance (TRA) or is in an approved break in training, or receives
Unemployment Insurance (UI) in lieu of TRA, while otherwise
eligible for TRA. TAA recipients also must meet eligibility
deadlines for enrollment in TAA-approved training or receive a
written waiver to maintain HCTC eligibility.
- A qualified family member of an individual who fell under one
of the categories listed above at the time of Medicare enrollment,
death or divorce.
Requirement 2
You and your family members must also meet the following general
requirements in order to receive the tax credit:
- Be covered by a qualified health plan for which you pay more
than 50% of the premiums
- Not be enrolled in Medicare Part A, B, or C; or you are
enrolled in Medicare but only claiming premiums for your qualified
family members
- Not be enrolled in Medicaid or the Children's Health Insurance
Program (CHIP)
- Not be enrolled in the Federal Employees Health Benefits
Program (FEHBP)
- Not be enrolled in the U.S. military health system
(TRICARE)
- Not be imprisoned under federal, state, or local authorit
- In order to receive the HCTC, you cannot be claimed as
a dependent on someone else's federal income tax return and your
qualified family members must be your spouse or a
dependent on your federal income tax return.
Requirement 3
You must be enrolled in a qualified health plan. Qualified
health plans include:
- COBRA - insurance that has been extended from your former
job-based health coverage. (You cannot also be receiving the COBRA
Premium Reduction, which pays 65% of COBRA premiums to eligible
laid-off workers.)
- State-qualified health plan - approved by a state's Department
of Insurance as meeting the requirements for the Trade Act of
2002
- Spousal coverage - health insurance that is provided through
your spouse's employer. Your spouse must pay more than 50% of the
cost for spousal coverage.
- A health plan purchased through a Voluntary Employees'
Beneficiary Association (VEBA) that was
established through the bankruptcy of your former employer.
- Non-group / individual health plan - health insurance that is
sold by a private health insurance company to one individual or
family at a time. The plan must have been purchased through an
insurance company, agent, or broker and must have started 30 days
before you left the job that made you eligible for TAA, ATAA, RTAA
or PBGC benefits.
Receiving the Health Coverage Credit
There are two ways to receive reimbursement under the Health
Coverage Tax Credit:
- You can register to receive the HCTC as a monthly payment to
your insurance plan, or
- You can claim the HCTC on your yearly tax return.
To claim the credit, complete Form 8885 and attach the form to your Form
1040 or Form 1040A.
For more information, see the IRS Health Coverage Tax Credit
Overview.