The health coverage tax credit (HCTC) is a refundable tax credit available to certain people who need help paying for health insurance.
The HCTC is intended to help retirees, trade-impacted workers and their families pay for major medical healh coverage, prescription-only health coverage, mental health coverage, substance abuse coverage, and hearing coverage.
Who is Eligible?
There are three requirements to be eligible to claim the health coverage credit. All three requirements must be met in order to be eligible.
Requirement 1
At least one of the following must be true:
- You are a Pension Benefit Guaranty Corporation pension recipient and under age 55.
- You are receiving a Trade Readjustment Allowance under the Trade Adjustment Assistance (TAA) program and attending a TAA-approved training course.
- You are receiving wage subsidy under the Alternative TAA program for older workers.
Requirement 2
All of the following must be true for every month you want to claim the credit:
- You are not entitled to Medicare benefits.
- You are not entitled to health coverage through the military health system (not including health coverage received as Veterans Affairs benefits).
- You are not in prison.
- You cannot be claimed as a dependent on another person's tax return.
Requirement 3
You must be enrolled in a qualified health plan. Qualified health plans include:
- COBRA – insurance that has been extended from your former job-based health coverage.
- State-qualified health plan – approved by a state's Department of Insurance as meeting the requirements for the Trade Act of 2002
- Spousal coverage – health insurance that is provided through your spouse's employer. Your spouse must pay more than 50% of the cost for spousal coverage.
- Non-group / individual health plan – health insurance that is sold by a private health insurance company to one individual or family at a time.
Receiving the Health Coverage Credit
There are two ways to receive reimbursement under the health coverage credit:
- You can register to receive the HCTC as a monthly payment to your insurance plan, or
- You can claim the HCTC on your yearly tax return.
To claim the credit, complete Form 8885 and attach the form to your Form 1040 or Form 1040A.
For more information, see the IRS Health Coverage Tax Credit Overview.
