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Credits

Health Coverage Credit

The Health Coverage Tax Credit (HCTC) 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 authority
  • 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 HCTC Latest News and Background.