HCTC: Latest News and Background
IRS working to implement new law; Reminds taxpayers to continue existing health coverage during interim period.
The Trade Preferences Extension Act of 2015 (Public Law 114-27), enacted June 29, 2015, extended and modified the expired Health Coverage Tax Credit. Previously, those eligible for HCTC could claim the credit against the premiums they paid for certain health insurance coverage through 2013. The HCTC can now be claimed for coverage through 2019.
The IRS is currently reviewing the legislation and is working with its partners, the Pension Benefit Guaranty Corporation and the Department of Labor State Workforce Agencies, to determine the best way for taxpayers to receive this important credit. The law is similar to the version of the credit that expired in 2013 but includes modifications that affect how the credit is administered. The IRS will provide guidance on the credit in the near future, including guidance for taxpayers who also qualify for the Premium Tax Credit under the Affordable Care Act.
In the meantime, the IRS offers the following guidance to anyone who may be eligible for the Health Coverage Tax Credit:
- If you intend to claim the HCTC for 2014, you must first file an original 2014 tax return without claiming the HCTC even if you have no other filing requirement or requested an extension to file a 2014 tax return.
- Eligible taxpayers can claim the HCTC for 2014 by filing an amended return when the IRS issues the appropriate guidance.
- Do not claim the HCTC using an old or altered Form 8885 when you file your Form 1040. There is no Form 8885, Health Coverage Tax Credit, for tax year 2014. The IRS will provide guidance on how to file.
- Until the IRS provides more information, an eligible taxpayer who wants to elect the HCTC should ensure that he or she is enrolled in qualifying health care coverage. Although coverage through the Health Insurance Marketplace qualifies for the HCTC for 2014 and 2015, that coverage is ineligible for the HCTC in 2016.
- If you or anyone on your return purchased 2014 health insurance coverage from the Health Insurance Marketplace and advance payments were made on your behalf, you must file a 2014 tax return with Form 8962, Premium Tax Credit, before you can amend your return to claim the HCTC.
- Advanced payments (monthly option) for HCTC are planned to begin July 2016. The legislation allows IRS one year to implement the monthly option.
- If you can be claimed as a dependent on another person’s federal income tax return, you are not a candidate for the HCTC.
- Taxpayers can use IRS Free File available on IRS.gov through Oct. 15. Nearly everyone can e-file their tax return for free through IRS Free File.
- Updates and guidance will be posted to this page on IRS.gov as they become available and taxpayers should wait for this information before they file an amended return.
Background of the HCTC
The Health Coverage Tax Credit is a federally funded tax credit that allows individuals to pay only a portion of their qualified health insurance. The HCTC helps make health coverage more affordable for eligible individuals and their families by paying a significant portion of qualified health insurance premiums.
Certain displaced workers are certified by the Department of Labor as eligible to receive Trade Readjustment Allowances under the Trade Adjustment Assistance program. Others may be eligible because they receive benefits from the Pension Benefit Guaranty Corporation and are 55 years old or older.
HCTC Program Timeline
- 2002: HCTC began as a ground breaking tax credit program.
- August 2003: HCTC was first made available on a monthly basis.
- May 2009: Benefits expanded under American Recovery and Reinvestment Act. These benefits were set to expire on December 31, 2010.
- December 2010: Congress passed a short term extension of the changes made to the HCTC by the ARRA. These provisions expired on February 13, 2011.
- October 2011: Benefits again expanded by the Trade Adjustment Assistance Act of 2011.
- January 1, 2014: The legislation that authorized the HCTC expired. This expiration date was set by Congress when the Trade Adjustment Assistance Extension Act of 2011 was passed.
- June 29, 2015: H.R. 1295, the Trade Preferences Extension Act of 2015 (Public Law 114-27), enacted June 29,2015, extended and modified the expired HCTC through 2019.