HCTC: Information for Tax Professionals
This page provides links to information that you can use to help your clients receive the HCTC.
Eligibility for the HCTC
For the 2013 tax year, candidates for the HCTC can claim 72.5% of their payments for qualified health insurance premiums. Individuals receive an HCTC Eligibility Certificate in the mail if they meet candidate requirements. We need your help to make sure they know about and understand how to claim the HCTC. Start by asking the individuals if, during any part of the tax year, they were:
- A Pension Benefit Guaranty Corporation (PBGC) payee and 55 years old or older or
- An eligible Trade Adjustment Assistance (TAA) recipient (including Alternative TAA or Reemployment TAA). An eligible TAA recipient is 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.
If the answer to any of these questions is "yes," and if the individuals are enrolled in a qualified health plan, it would be beneficial to review the requirements listed on the HCTC Eligibility Requirements and How to Receive the HCTC page in detail with them to determine if they can claim this valuable tax credit.
Important Information Regarding the Medical Loss Ratio (MLR) Rebate
Due to the Affordable Care Act enacted in May 2010, insurance companies are required to spend a specified percentage of premium dollars on medical care and quality improvement activities, meeting an MLR standard. Insurance companies that do not meet the MLR standard are required to provide rebates to their consumers. If your customer received an MLR rebate in 2013 for coverage and premiums paid in 2012, that included months they received the HCTC, they must return a portion of that rebate to the IRS.
Please note this is a unique situation that only affects a small group of taxpayers.
Instructions on how to claim the MLR rebate on their federal income tax return were included with the Form 1099-H, Health Coverage Tax Credit (HCTC) Advance Payments, which was sent to any individual who received an advanced (monthly) payment in one or more months the 2013 tax year. These instructions are also available by clicking here.
The following documents will help you understand the HCTC so you can help individuals claim the tax credit:
- 2013 HCTC Drop in Article for Tax Professionals - to include in your client, association, or organization newsletters.
- 2013 HCTC Frequently Asked Questions for Tax Professionals - a reference document containing frequently asked questions for tax professionals about the HCTC Program.
- Form 8885 - the form that individuals need to use to claim the HCTC on a federal income tax return.
See the HCTC Information for Yearly Filers page for more information.
Helpful Information about the Yearly HCTC
The following tips are provided to help you understand the HCTC:
- Any person who enrolled in Medicare Part A, B, or C cannot receive the HCTC during that same month. Any person receiving Social Security disability benefits for two years or more automatically becomes enrolled in Medicare and therefore cannot receive the HCTC. However, qualified family members have continued HCTC eligibility under the Trade Adjustment Assistance Extension Act of 2011 if the TAA recipient or PBGC payee enrolls in Medicare. Go to the qualified family members page for more information.
- Insurance providers may offer non-HCTC plans with names that are similar to the HCTC-qualified plans. Therefore, the taxpayer must make sure the health plan is HCTC-qualified before claiming the tax credit. Go to the Qualified Health Plan page for more information on qualified health plans.
- A group health plan through the eligible individual’s employer (former employer or employees’ union) is not qualified health coverage unless it is COBRA.
- Premiums paid through employee payroll deductions, by the individual’s spousal coverage, do not qualify for the HCTC unless they were paid with after-tax dollars and the employer paid less than 50% of the premiums.
- Premiums claimed on line 2 of Form 8885, Health Coverage Tax Credit, can not be claimed elsewhere on the federal tax return (e.g., Schedule A Medical and Dental Expenses). Also, monthly (advance) payments and reimbursement credits from the HCTC Program - which are listed on Form 1099-H in boxes 3 through 14 - and amounts paid to "U.S. Treasury - HCTC" cannot be included on line 2 of Form 8885.
Visit the Tax Information for Tax Professionals page on the IRS website for general information geared toward the tax practitioner community.