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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 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. Information Regarding the Medical Loss Ratio (MLR) Rebate

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


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1.   Tax Credit Percentage
You can claim 72.5% of your payments made toward qualified health insurance premiums in 2012.  

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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.

  • 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.

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3.   Information Regarding the Medical Loss Ratio (MLR) Rebate

Due to the Affordable Care Act enacted in May 2010, insurance companies are required to spend a specified percentage of premium dollars on medical care and quality improvement activities, meeting an MLR standard. Beginning in the 2012 tax year, insurance companies that did not meet the MLR standard in the 2011 tax year were required to provide rebates to their consumers. If you received an MLR rebate, which included months you received the HCTC, you must return a portion of that rebate to the IRS.

Please note this is a unique situation that only affects a small group of taxpayers.

Instructions on how to claim the MLR rebate on your federal income tax return were included with the Form 1099-H, Health Coverage Tax Credit (HCTC) Advance Payments, which was sent to any individual who received an advanced (monthly) payment in one or more months the 2012 tax year. These instructions are also available by clicking here.  



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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 10, 2012 will still appear on Form 1099H. 

A ‘Corrected Form 1099-H’ will be issued once returned payments are fully reconciled by HCTC accountants. 


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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.


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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.


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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 2012 tax, 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 2012, 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 2012 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: 2013-03-05