Q1. How do I know if I am eligible to claim the Health Coverage Tax Credit for 2017?
A1. If you were an eligible trade adjustment assistance recipient, alternative TAA recipient, reemployment TAA recipient, Pension Benefit Guaranty Corporation (PBGC) payee, or a qualifying family member during 2017, you may be able to claim the HCTC for qualifying health insurance coverage. The PBGC, the Department of Labor or a State Workforce Agency should have notified you by letter. Remember you, your spouse and eligible family members must have been enrolled in qualified health insurance coverage for any months in 2017 that you are you claiming the HCTC.
Qualifying family members (spouses and dependents) can be considered recipients and file Form 8885 under their name and social security number after certain life events. You are considered a recipient and are eligible to continue to receive the HCTC in the event that a TAA recipient, alternative TAA recipient, reemployment TAA recipient, or PBGC payee is enrolled in Medicare, dies or finalizes a divorce with you and you were a qualifying family member immediately before such event. People who were qualifying family members can receive the tax credit for eligible coverage up to 24 months from the date of Medicare, death or divorce.
Q2. What health insurance qualifies for the HCTC?
A2. All health insurance plans that were qualified for the HCTC in 2013 qualify for the HCTC for 2017. A qualified health plan offered through a Health Insurance Marketplace is not qualified coverage for the HCTC for 2017. In addition, you no longer have to be enrolled in non-group (individual) coverage for 30 days before you became eligible for the HCTC. Review the instructions for Form 8885, Health Coverage Tax Credit, for information about qualified health insurance plans that are eligible for the HCTC in 2017.
Q3. I enrolled in a qualified health plan in 2017 through a Health Insurance Marketplace. What do I need to do?
A3. You cannot claim the HCTC for any health plans offered through a Health Insurance Marketplace in 2017. Health Insurance Marketplace coverage is not qualified coverage for the HCTC for 2017. If you would otherwise be eligible to claim the Health Coverage Tax Credit, but enrolled in Marketplace coverage for 2016, see our questions and answers about qualifying coverage for more information.
You cannot claim both the HCTC and the premium tax credit for the same coverage for the same coverage months checked on line 1 of Form 8885. You can only claim PTC for coverage for which you do not elect the HCTC. If you received the benefit of advance payments of the premium tax credit for any month in 2017, you are required to file Form 8962, Premium Tax Credit, to reconcile those payments.
Q4. Are there special instructions for claiming the HCTC when I file my 2016 tax return?
A4. Yes. You must:
- Make the required election to take the HCTC on Form 8885, Health Coverage Tax Credit;
- File Form 8885, Health Coverage Tax Credit, with your income tax return;
- Attach a copy of the official letter of eligibility from the PBGC, Department of Labor, or your state workforce agency or employment office; and
- Attach proof that your 2017 insurance was qualified health insurance coverage and that the premiums claimed for your 2017 coverage were paid.
Q5. What documents should I include and attach to my tax return?
A5. You must attach several different documents to your income tax return for the IRS to process your claim for the HCTC. If you do not attach the required documentation, processing delays may occur if the IRS has to correspond with you for additional information.
Attachment #1: You must attach documents that reflect that you were an eligible individual for the HCTC 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
Attachment #2: You must also attach documents to verify that your 2017 insurance was qualified health insurance coverage and the premiums claimed for your 2017 coverage were paid. See the instructions to Form 8885 for a detailed list of required documents that you must attach.
Q6. I received the benefit of advance payments of the Health Coverage Tax Credit for at least one month in 2017. How do I report advance monthly payments of the HCTC on my tax return? What do I need to do?
A6. Do not report any insurance premiums paid by you for eligible coverage months for which you received the benefit of the advance monthly payment program. Also, do not report any advance monthly payments your health plan administrator received from the IRS.
Q7. Can I file my return electronically? What about the supporting documents? Are there any special instructions?
A7. If you e-file, you can attach a copy of any required documents to an electronically filed return as a PDF if your tax software supports it, or you must attach those documents to Form 8453, U.S. Individual Income Tax Transmittal, for an IRS e-file Return, and mail them to the IRS according to the instructions for that form.
Q8. Where can I find more information about the HCTC and reconciling advance payments of the premium tax credit?
See IRS Notice 2016-02 for more information, including questions and answers about specific situations.
To claim the HCTC for tax year 2016, taxpayers will follow a similar process using the 2016 tax year instructions.