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Health Coverage Tax Credit

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The Health Coverage Tax Credit is a tax credit that pays 72.5% of qualified health insurance premiums for eligible individuals and their families.

The Trade Preferences Extension Act of 2015

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 the 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 continues to work with its partners, the Pension Benefit Guaranty Corporation, the Department of Labor and State Workforce Agencies to ensure that all eligible taxpayers have the opportunity to receive this important credit.

Eligible taxpayers should review the special filing instructions and documentation requirements to claim the HCTC, which acts as partial reimbursement for premiums paid to qualifying health plans, for 2014 and 2015.

Interim process for making advance monthly payments of HCTC for 2016

In general, eligible taxpayers will claim the HCTC for 2016 when they file their federal income tax returns in 2017. However, the IRS has implemented a limited interim process for making advance monthly payments in 2016. This process is only available to individuals for months they are enrolled in qualified health coverage and working with their Health Plan Administrator or a Third Party Administrator that is willing to meet certain IRS requirements and enter into a Memorandum of Understanding (MOU) with the IRS. The MOU details the activities participating HPA/TPAs need to perform in order to enable the IRS to make monthly payments prior to January 2017 for the participants they represent. 

Health Administrators may inquire about or indicate their interest in participating in this process by sending an email to *W&I HCTC STAKEHOLDER. Instructions for individuals who can potentially benefit from this process will be provided by participating HPA/TPAs to their members or clients.

The IRS expects to implement the full advance monthly payment program in January 2017 and will provide more information about the enrollment process in the fall of 2016.

Who can claim the Health Coverage Tax Credit?

You may only elect to take the HCTC if you are one of the following:

  • An eligible trade adjustment assistance (TAA) recipient, alternative TAA (ATAA) recipient, reemployment TAA (RTAA) recipient.
  • An eligible Pension Benefit Guaranty Corporation pension payee.
  • The family member of an eligible TAA, ATAA, or RTAA recipient or PBGC pension payee who is deceased or who finalized a divorce with you.

You are not eligible if you could have been claimed as a dependent on another person’s federal income tax return.  

What health insurance plans qualify for the Health Coverage Tax Credit?

  • All plans that were qualified for the HCTC in 2013 qualify for the HCTC through 2019.
  • This includes individual - private and non-group - health insurance that you purchase for yourself or your family from an insurance company, agent, or broker.
  • Review the Instructions for Form 8885 for information about qualified health insurance plans that are eligible for the HCTC in 2014, 2015 and 2016.

Do plans purchased through the Health Insurance Marketplace qualify for the HCTC?

  • For 2014 and 2015 only: qualified coverage includes qualified health plans offered through a federally facilitated or a state-based Health Insurance Marketplace.
  • For 2016 and beyond: Health Insurance Marketplace coverage will no longer be qualified coverage for the HCTC. For taxpayers who may be eligible to claim the Health Coverage Tax Credit and enrolled in Marketplace coverage for 2016, see our questions and answers for more information.

How do I claim HCTC for 2015?

  • File Form 8885, Health Coverage Tax Credit with your 2015 income tax return and elect HCTC when you file.
  • Follow special instructions, for filing your tax return to elect HCTC.
  • Attach documentation about your HCTC eligibility, that your 2015 health plan was qualified and that the premiums claimed for your 2015 coverage were paid.
  • Follow special instructions, if you or anyone claimed on your federal income tax return enrolled in 2015 Marketplace coverage and received the benefit of advance payments of the Premium Tax Credit in 2015. You must reconcile the advance payments on Form 8962, Premium Tax Credit.

See the Questions and Answers and Instructions for Form 8885 for more information.

 

 

How do I claim HCTC for 2014?

Claimed or reconciled the Premium Tax Credit in 2014? You must follow additional instructions to claim the HCTC. Refer to these Questions and Answers for more information.

 

Page Last Reviewed or Updated: 16-Aug-2016