PriorTax | Health Coverage Tax Credit - Form 8885

Health Coverage Tax Credit - Form 8885

The Health Coverage Tax Credit is available for individuals who qualify and their families to help with their health insurance costs. The HCTC pays 72.5% of qualified health insurance premiums. It does not provide health insurance. Eligible individuals must have or seek a health plan that qualifies for the credit in which they pay above 50% of the premiums.

Qualified individuals and family members must meet several stringent requirements. Notably,

  • They cannot be enrolled in Medicare Part A, B, or C
  • They cannot be enrolled in Medicaid, or the Children's Health Insurance Program (CHIP)
  • They cannot be enrolled in Federal Employees Health Benefits Program (FEHBP) or eligible to receive benefits under the U.S. military health system (TRICARE).
  • They are not in prison under federal, state, or local authority
  • They are not receiving a 65% COBRA Premium Reduction
  • They cannot be claimed as a dependent on someone else's federal income tax return

  • In addition, candidates must be either of the following:

  • A Pension Benefit Guaranty Corporation (PBGC) payee who is 55 years old or older.
  • An eligible Trade Adjustment Assistance (TAA), Alternative TAA (ATAA), or Reemployment TAA (RTAA) recipient.
  • A qualified family member of an individual who fell under one of the categories listed above at the time of Medicare enrollment, death, or divorce.

  • The Health Coverage Tax credit can be taken in monthly installments or collected yearly, in which case the individual pays the full cost of the health insurance plan and then claims the refundable credit on his or her federal income tax return. Form 8885 needs to be attached to the tax return at the time of filing.