A federal income tax credit is available to help certain trade dislocated workers and early retirees, and their dependents, buy qualified health insurance coverage. The Health Coverage Tax Credit (HCTC) covers 65% of the insurance premium for qualified coverage. Under this program, you can either claim the tax credit at the end of the year on your tax return or you can elect to have the money paid directly to your qualified health plan each month by the Internal Revenue Service.
When am I eligible for the HCTC?
- To be eligible for the tax credit, you must be receiving Trade Adjustment Assistance (TAA) benefits or retirement benefits from the PBGC. If you are receiving PBGC benefits, you also must be at least 55 years old. In addition, you must not be enrolled in Medicare, Medicaid, or in other employer-sponsored coverage for which the employer contributes at least half of the premium.
- HCTC may apply to your family, too. If you are eligible, you can use the credit to help purchase qualified health coverage for your qualified family members. Qualified family members are your spouse and dependents that you can claim on your federal tax return. Family members are not eligible if they are enrolled in another group health plan where the employer pays at least 50% of the cost of coverage, or in Medicaid, SCHIP, FEHBP, Tricare/CHAMPUS.
- Eligibility for HCTC is not based on income. In addition, the HCTC is refundable. This means you can claim the credit even if you do not earn enough income to owe federal income tax.
How much of my health coverage premium will the tax credit cover?
- The HCTC is equal to 65% of health insurance premiums for qualified health insurance coverage.
What health coverage is eligible for the Tax Credit?
- The HCTC can only be used to help pay for “qualified†health coverage. COBRA continuation coverage is considered qualified health coverage. (See Chapter 3 for more information about COBRA.) In addition, Arizona has designated HCG coverage as a state qualified health plan. (See Chapter 4 for more information about the HCG program.)
How do I claim the HCTC?
- You can claim the HCTC on your tax return and be reimbursed for 65% of the premium you paid for qualified coverage while you were eligible for the HCTC. Currently, this is the only way to claim the HCTC if your qualified health plan is provided through a spouse’s employer.
- Alternatively, you can choose to have your credit sent directly to your qualified health plan each month. To do this, you must register with the HCTC customer service center by calling 1-866-628-HCTC (1-866-628-4282), Monday through Friday between the hours of 7 am and 7 pm, Central time. TDD/TYY callers, please call 1-866-626-HCTC (1-866-626-4282).
Where can I get more information?
- For more information about the HCTC, contact the HCTC customer service center at 1-866-628-HCTC, or see the IRS website at www.irs.gov/individuals (click on HCTC)
- For more information about TAA benefits contact, www.doleta.gov/tradeact.
- For more information about PBGC, visit www.pbgc.gov or call 1-202-326-4000 with general inquiries.
