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Claiming the Health Coverage Tax Credit for Tax Year 2017

If you were an eligible trade adjustment assistance recipient, alternative TAA recipient, reemployment TAA recipient, Pension Benefit Guaranty Corporation payee, or a qualifying family member, you may be able to claim the Health Coverage Tax Credit (HCTC) for qualifying health insurance coverage during 2017 when you file your income tax return.

Important Changes

While eligibility for the HCTC in 2017 is generally the same as before the credit was reauthorized in 2015, there are several important changes.

  • You must make an election to claim the HCTC for a month during which you were eligible for the HCTC.
  • A qualified health plan offered through a Health Insurance Marketplace is not qualified coverage for the HCTC for 2017. If you are eligible to claim the Health Coverage Tax Credit and enrolled in Marketplace coverage for 2017, see our questions and answers for more information.
  • You no longer have to be enrolled in non-group (individual) coverage for at least 30 days before you became eligible for the HCTC in order for your coverage to be qualified health insurance for the HCTC.

Instructions

To claim the HCTC for 2017, file Form 8885, Health Coverage Tax Credit, with your 2017 income tax return. Follow the 2017 Instructions for Form 8885 to figure your HCTC.

AMP participants are required to file a timely federal tax return and elect, on Part 1 of Form 8885, to take  the Health Coverage Tax Credit.

Election to Take the HCTC

You must elect the HCTC for the months you participated in the advance monthly payment program and check those months on Form 8885. Form 8885 and its instructions provide details on how to make the election needed to claim the HCTC and reconcile the Advance Monthly Payments. Make your election by checking the box on line 1 for the first eligible coverage month you are electing to take the HCTC. You must also check all boxes on line 1 for each coverage month after the election month for which you’re eligible to take the HCTC. The election doesn’t apply to any coverage month for which you aren’t eligible to take the HCTC. When checking the boxes for each month in Form 8885, Part I, consider payments you made to “US Treasury-HCTC” to be payments you made directly to your health plan. Payments made to “US Treasury-HCTC” are still not considered payments you made directly to your health plan for Form 8885, Part II.

Proof of Eligibility

You are required to attach certain documents that prove that you were eligible to claim the credit, that your 2017 health insurance plan was qualified, and that the premiums claimed for your 2017 coverage were paid. This proof must include:

  1. An official letter reflecting that you were an eligible individual for the months claimed in 2017:
    • For trade certified individuals demonstrating TAA, alternative TAA, or reemployment TAA eligibility—a copy of the official letter from the Department of Labor, your state workforce agency or employment office stating you are eligible for trade adjustment benefits
    • For PBGC eligibility—a copy of the official letter from the PBGC stating you received a benefit paid by the PBGC or a  copy of your Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, from the PBGC showing you received a benefit paid by the PBGC
  2. For each month you are claiming the credit for 2017 you must also provide:
    • Proof that your insurance was qualified health insurance coverage and
    • Proof of payment for insurance premiums

Received the Benefit

If you or anyone claimed on your federal income tax return received the benefit of advance monthly payments of the Health Coverage Tax Credit in 2017, you should not claim any part of the total premium paid to your administrator for these months. See the instructions for Form 8885 for more information.

Purchased Health Insurance Marketplace Coverage

A qualified health plan offered through a Health Insurance Marketplace is not qualified coverage for the HCTC for 2017. Once you elect to claim the HCTC, you can’t claim the premium tax credit for coverage in that month or in any subsequent months during the year in which you’re eligible to claim the HCTC.

However, you can claim the premium tax credit and the HCTC for the same month for different coverage for a different member of your household. You must complete Form 8962, Premium Tax Credit, to claim the premium tax credit.

In addition, if you or anyone claimed on your federal income tax return received the benefit of advance payments of the premium tax credit in 2017, you must reconcile the payments on Form 8962, Premium Tax Credit, and follow specific instructions to reconcile the advance payments. See the instructions for Form 8885 and Publication 974, Premium Tax Credit, for more information.

Refer to IRS.gov/HCTC, the Instructions for Form 8885 and Questions and Answers for more information about how to claim the HCTC when you file your 2017 return.

To claim the HCTC for tax year 2016, taxpayers will follow a similar process using the 2016 tax year instructions.