IRS Logo
Advanced
  • Filing
  • Payments
  • Refunds
  • Credits & Deductions
  • News & Events
  • Forms & Pubs
  • Help & Resources
  • for Tax Pros
Print

HCTC: Information for Yearly Filers

Yearly HCTC Guidelines
With the Yearly HCTC, you pay your qualified health plan premiums in full throughout the year and then claim the credit on your federal income tax return. This page explains how to file for the Yearly HCTC, what to expect after filing, and some quick tips.

You can claim the Yearly HCTC on your federal tax return for the months in which you met all HCTC eligibility requirements, and you paid your premiums directly to your qualified health plan. After the IRS processes your tax return, the credit will be applied to your taxes due or, if it is more than the taxes you owe, it will be issued as a refund.

Below is a list of the topics on this page that explain how to claim the Yearly HCTC.  Please scroll down to find the topic you would like to read about.

1. Tax Credit Percentage

2. How to Claim the Yearly HCTC

3. How to Claim the Additional 7.5% Retroactive Credit

4. What to do if the Information on Your Form 1099-H is Incorrect

5. What Happens After Claiming the Yearly HCTC

6. Information for claiming the Yearly HCTC for your qualified family members

7. Tips for Filing for the Yearly HCTC


----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------


1.   Tax Credit Percentage
Due to the Trade Adjustment Assistance Extension Act of 2011, the HCTC tax credit percentage increased from 65% to 72.5%, retroactively to February 13, 2011.  You can claim 80% of your payments for qualified health insurance premiums for January or February 2011 coverage and 72.% of your payments for March through December 2011 coverage. 

Additional 7.5% Retroactive Credit Amount
If you received the 65% tax credit through the monthly HCTC program or through the National Emergency Grant (NEG) Bridge Program, in any month from March through December 2011, you are eligible to receive an additional 7.5% retroactive credit on your federal income tax return.  Read the instructions below on how to claim this amount.


----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------


2.   How to Claim the Yearly HCTC
You can claim the HCTC for months in which you were covered by a qualified health plan and made payments directly to your health plan.

  • Make sure you meet all the HCTC Eligibility Requirements
  • Make sure you have a Qualified Health Plan and make payments directly to your health plan throughout the year.
  • Keep the following documents for your records:
    • Records of your payments and other supporting documents to submit with Form 8885
    • HCTC invoices or Form 1099-H for those months in which you received the monthly HCTC
    • HCTC documents or letters
  • Fill out and include IRS Form 8885 and all required supporting documents with your federal income tax return.  For a full list of the required supporting documents you will need for the Yearly HCTC, please refer to the instructions found on Form 8885.
  • Staple Form 8885 to your Form 1040, U.S Individual Income Tax Return, when you have completed it.  If you have additional forms to attach, attach them in sequential order, as shown on the upper right-hand corner of each form.  You should staple the required supporting documents together with all of your tax schedules and forms.

----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

3.   How to Claim the Additional 7.5% Retroactive Credit
If you were enrolled in the monthly HCTC program during the 2011 tax year, you will be sent a Form 1099-H, Health Coverage Tax Credit (HCTC) Advance Payments.  This form is provided to you because the HCTC Program made monthly payment(s) to your health plan administrator in one or months in the 2011 tax year.

Boxes 3 through 14, on your Form 1099-H, reflect the tax credit amount you received for each month in 2011 (an 80% tax credit for payments made by the HCTC Program in January and February 2011 and a 65% tax credit for payments made in March through December 2011).

To claim the additional 7.5% retroactive credit, you must: 

  1. Refer to the box to the left of box 8 on your Form 1099-H.  This is your additional 7.5% retroactive credit that the HCTC Program has calculated.* 
    If the amount listed is $0.00, you do not have a retroactive credit amount.

  2. Complete and file Form 8885, Health Coverage Tax Credit, with your 2011 Form 1040, U.S. Individual Income Tax Return.  Enter the retroactive tax credit amount on line 7 of Form 8885, Health Coverage Tax Credit. You do not have to complete lines 1 through 6, and you do not have to submit any supporting documentation.

Note:  If you are also claiming the credit for any month that you made a payment directly to a qualified health plan, you must complete lines 1 through 6 for those months. Then, add the additional 7.5% retroactive credit amount to the sum of any amount on Part II, line 6, of Form 8885 and enter the total on Part II, line 7.  You must submit all required supporting documentation and keep a copy of all documents for your records.

*The additional 7.5% retroactive credit will not be provided for the months in which a participant received the NEG Bridge Grant or Gap Filler assistance from their state. These participants will need to calculate the 7.5% amount on their own.


----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------


4.   What to do if the Information on Your Form 1099-H is Incorrect
When payments are returned to the monthly HCTC program (or to you), it typically means that coverage has ended and the payment from HCTC was unnecessary.  Any payment returned to HCTC (or to you) that was not fully reconciled by our program as of January 9th, 2012 will still appear on Form 1099H.  If this situation applies to you, then the pre-calculated amount of additional credit listed to the left of Box 8 on your 2011 Form 1099-H SHOULD NOT be used on Form 8885 when filing your federal income tax return. 

A ‘Corrected Form 1099H’ will be issued once returned payments are fully reconciled by HCTC accountants.  Due to anticipated delays in returned funds processing, you should use an alternative method to calculate the appropriate amount to claim for you 7.5% retroactive credit.  Follow these steps to determine the correct amount of additional credit to list on Form 8885. 

  1. On your original Form 1099-H, locate the amount listed in Box 5 through 14 (March-December) that corresponds to the payment that was, or will be, returned by your health plan administrator. If more than one month is being returned by your health plan, then ADD the amounts for all months being returned. Remember that the Monthly HCTC pays in advance of your health plan due date and coverage.
    • For example, if payments made by HCTC in October and November 2011 (intended for November and December coverage) are being returned by your health plan administrator, then sum the amounts listed in Box 12 and 13. 


  2. Divide the amount determined in Step 1 by .65.

  3. Multiply the amount calculated in Step 2 by .075.

  4. Subtract the amount calculated in Step 3 from the amount in the box to the left of Box 8 on your original Form 1099H.

  5. Use the calculated amount from Step 4 to complete Part II, line 7, of Form 8885.  This represents the adjusted amount of additional credit you should receive.

Note: If you are only claiming the additional 7.5% credit, enter the retroactive tax credit amount on line 7 of Form 8885, Health Coverage Tax Credit.  You do not have to complete lines 1 through 6, and you do not have to submit any supporting documentation.

If you are also claiming the credit for any month that you made a payment directly to a qualified health plan, you must complete lines 1 through 6 for those months. Then, add the additional 7.5% retroactive credit amount to the sum of any amount on Part II, line 6, of Form 8885 and enter the total on Part II, line 7.  You must submit all required supporting documentation and keep a copy of all documents for your records.


----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------


5.   What Happens After Claiming the Yearly HCTC
If you met all the eligibility requirements, made payments directly to a qualified health plan, and submitted the proper documentation with your federal income tax return you will receive the HCTC amount you claimed on Form 8885.  After the IRS processes your tax return, the credit will be applied to your taxes due or, if it is more than your taxes due, it will be issued as a refund.

Caution: If you receive the HCTC and the IRS later determines that you were not eligible to receive the tax credit, you will have to repay the IRS any credit amount you received.  Also, if you do not meet all the eligibility requirements or if you submit incomplete documentation to the IRS, you will not receive the tax credit.


----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------


6.   Yearly HCTC Information for Qualified Family Members
Due to the Trade Adjustment Assistance Extension Act of 2011, qualified family members are eligible to receive the HCTC for up to 24 month after the original HCTC candidate (a PBGC payee or TAA recipient) enrolled in Medicare, finalized a divorce, or passed away.   Qualified family members must have been spouses or dependents at the time of the event, met all HCTC general requirements, and must have had a qualified health plan.

If you are a family member interested in receiving the Yearly HCTC due to a PBGC payee or TAA, ATAA, or RTAA recipient's enrollment in Medicare, divorce, or death, go to the qualified family members page for important requirements and information on claiming the Yearly HCTC.


----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------


7.   Tips for Filing for the Yearly HCTC
Please keep in mind the following points when you file for the yearly tax credit:

  • If you participated in the monthly HCTC program in the 2011 tax credit but, made additional payments directly to your qualified health plan during the tax year while you were eligible for the HCTC, you can claim the Yearly HCTC for those payments.
  • Participants who received the 65% tax credit through the Monthly HCTC or the through the National Emergency Grant (NEG) Bridge Program in any month from March through December 2011, are also eligible to claim an additional 7.5% retroactive credit.
  • Review the list of HCTC State-Qualified Heath Plans to verify your health plan was qualified for the HCTC during the 2011 tax year.
    • You do not need to change anything or attach any forms on your state tax return as a result of claiming the Yearly HCTC.
    • If you file electronically, you will need Form 8453, U.S. Individual Income Tax Declaration for an IRS e-file Return and must file Form 8885 with the required supporting documentation for claiming the Yearly HCTC.
  • Review other IRS Publications that may help you file for the Yearly HCTC:
    • IRS Publication 502, Medical and Dental Expenses
    • IRS Publication 17, Your Federal Income Tax for Individuals
    • IRS Publication 501, Exemptions, Standard Deduction, and Filing Information for questions on your status as a dependent


Return to the HCTC Eligibility Requirements page.

Return to the HCTC Program home page.

Go to the HCTC Quick References page to view a glossary of terms, frequently asked questions and additional resources.

If you have any questions, please contact us.

Page Last Reviewed or Updated: 2012-08-03