HCTC: Information for Yearly Filers
With the Yearly HCTC, you pay your qualified health plan premiums in full throughout the year and then claim the credit on your federal income tax return. This page explains how to file for the Yearly HCTC, what to expect after filing, and some quick tips.
You can claim the Yearly HCTC for the months in which you met all HCTC eligibility requirements and paid your premiums directly to your qualified health plan by filing Form 8885, Health Coverage Tax Credit, with your federal income tax return. Once the IRS processes your tax return, the credit will be applied against any outstanding balances due. If the credit is greater than any balance owed, you will receive a refund for the difference. The tax credit percentage for the 2013 tax year is 72.5% of your payments made for qualified health insurance premiums. As of January 1, 2014, the tax credit has expired and is no longer available.
How to Claim the Yearly HCTC
You can claim the HCTC for months in which you were covered by a qualified health plan and made payments directly to your health plan.
- Keep the following documents for your records:
Records of your payments and other supporting documents to submit with Form 8885
HCTC invoices or Form 1099-H for those months in which you received the monthly HCTC
HCTC documents or letters
Fill out and include IRS Form 8885 and all required supporting documents with your federal income tax return. For a full list of the required supporting documents you will need for the Yearly HCTC, please refer to the instructions found on Form 8885.
Staple Form 8885 to your Form 1040, U.S Individual Income Tax Return, when you have completed it. If you have additional forms to attach, attach them in sequential order, as shown on the upper right-hand corner of each form. You should staple the required supporting documents together with all of your tax schedules and forms.
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 you received an MLR rebate in 2013 for coverage and premiums paid in 2012, that included months you received the HCTC, you 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 your 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.
Information About IRS Form 1099-H
The HCTC Program sends IRS Form 1099-H to individuals who received one or more monthly HCTC payments or reimbursement credits during the year.
- IRS Form 1099-H reflects the amount the HCTC Program paid on behalf of an individual directly to their health plan. This form should be kept with the individual's records, not filed with a federal income tax return. Please note that monthly HCTC participants who have family members with their own HCTC Account Numbers and separate insurance policies, will receive one consolidated IRS Form 1099-H. This consolidated 1099-H will show the amount paid on behalf of the participant and all family members.
- If you are a current monthly HCTC participant, but made additional payments directly to your health plan during the tax year while you were eligible for the HCTC, you can claim the Yearly HCTC for these payments.
What to do if the Information on Your Form 1099-H is Incorrect
When payments are returned to the monthly HCTC program (or to you), it typically means that coverage has ended and the payment from HCTC was unnecessary. Any payment returned to HCTC (or to you) that was not fully reconciled by our program as of January 9, 2014, will still appear on Form 1099-H.
What Happens After Claiming the Yearly HCTC
If you met all the eligibility requirements, made payments directly to a qualified health plan, and submitted the proper documentation with your federal income tax return, you will receive the HCTC amount you claimed on Form 8885. Once the IRS processes your tax return, the credit will be applied against any outstanding balances due. If the credit is greater than any balance owed, you will receive a refund for the difference.
Caution: If you receive the HCTC and the IRS later determines that you were not eligible to receive the tax credit, you will have to repay the IRS any credit amount you received. Also, if you do not meet all the eligibility requirements or if you submit incomplete documentation to the IRS, you will not receive the tax credit.
Yearly HCTC Information for Qualified Family Members
Due to the Trade Adjustment Assistance Extension Act of 2011, qualified family members are eligible to receive the HCTC for up to 24 months, or until January 1, 2014, after the original HCTC candidate (a PBGC payee or TAA recipient) enrolled in Medicare, finalized a divorce, or passed away. Qualified family members must have been spouses or dependents at the time of the event, met all HCTC general requirements, and must have had a qualified health plan.
If you are a family member interested in receiving the Yearly HCTC due to a PBGC payee or TAA, ATAA, or RTAA recipient's enrollment in Medicare, divorce, or death, go to the qualified family members page for important requirements and information on claiming the Yearly HCTC.
Tips for Filing for the Yearly HCTC
Please keep in mind the following points when you file for the yearly tax credit:
If you participated in the monthly HCTC program in the 2013 tax year, but made additional payments directly to your qualified health plan during the tax year while you were eligible for the HCTC, you can claim the Yearly HCTC for those payments.
Review the list of HCTC State-Qualified Health Plans to verify your health plan was qualified for the HCTC during the 2013 tax year.
- You do not need to change anything or attach any forms on your state tax return as a result of claiming the Yearly HCTC.
- If you file electronically, you will need Form 8453, U.S. Individual Income Tax Declaration for an IRS e-file Return and must file Form 8885 with the required supporting documentation for claiming the Yearly HCTC.
Review other IRS Publications that may help you file for the Yearly HCTC:
IRS Publication 502, Medical and Dental Expenses
IRS Publication 17, Your Federal Income Tax for Individuals
IRS Publication 501, Exemptions, Standard Deduction, and Filing Information for questions on your status as a dependent
Return to the HCTC Program home page.
Go to the HCTC Quick References page to view a glossary of terms, frequently asked questions and additional resources.
If you have any questions, please contact us.