What Form 8885 Is For

Form 8885 is used to claim the Health Coverage Tax Credit (HCTC), a special tax benefit that helped certain workers and retirees pay for health insurance in 2019. Think of it as a government subsidy that covered 72.5% of your qualified health insurance premiums—meaning if you paid $1,000 for coverage, you could get back $725 as a tax credit.

This credit was designed specifically for people who lost their jobs due to foreign trade (Trade Adjustment Assistance recipients) or those receiving pension payments from the Pension Benefit Guaranty Corporation (PBGC) because their company pension failed. Unlike most tax credits where you claim the money after the fact, the HCTC had a unique feature: you could receive advance monthly payments throughout the year, or claim the full credit when filing your tax return. IRS Form 8885 Instructions

The program was relatively rare—most taxpayers never encountered it. If you weren't certified by the Department of Labor as a displaced worker or didn't receive PBGC pension payments, this form doesn't apply to you. Importantly, 2019 was originally supposed to be the last year for the HCTC program, though it was later extended.

When You’d Use Form 8885 (Late or Amended Filing)

You would file Form 8885 with your original 2019 tax return if you qualified for the HCTC during that year. However, there are important situations where you'd file it late or as part of an amended return.

Late Filing Scenarios: If you didn't claim the HCTC on your original 2019 return but were eligible, you can file an amended return (Form 1040-X) to claim it retroactively. You generally have three years from the original filing deadline to do this—meaning for 2019 returns, you'd have until April 15, 2023 (or later if you filed for an extension). This is particularly common because many eligible individuals don't realize they qualify for this obscure credit.

Critical Late-Filing Requirement: Here's a crucial rule many people miss—if you participated in the advance monthly payment program during 2019 (where the government paid 72.5% of your premiums directly to your insurance company each month), you must file Form 8885 even if you can't claim any additional credit. Failing to file this election form means those advance payments become taxable income that you'll owe back to the IRS. This catches many taxpayers by surprise when they receive IRS letters requesting repayment. IRS Form 8885 Instructions

Amended Return Situations: You'd also amend if you made errors in your original Form 8885, such as miscalculating eligible months, failing to include all qualified premiums, or discovering you received advance payments you forgot to account for. When amending, you'll need to complete a corrected Form 8885 and attach it to Form 1040-X.

Key Rules or Details for 2019

Program Expiration

The HCTC was originally set to expire at the end of 2019, making it the final year for the credit. However, Congress later extended it through 2020 via the Further Consolidated Appropriations Act of 2020. For your 2019 return, you could claim the credit for any eligible coverage months throughout the calendar year. IRS Form 8885 Instructions

The 72.5% Coverage Rate

For 2019, the HCTC covered exactly 72.5% of your qualified health insurance premiums. This means if you paid $10,000 annually for eligible coverage, your maximum credit would be $7,250 (not including any advance payments you already received).

Eligibility Requirements

To qualify, you had to meet several strict conditions on the first day of each month you're claiming:

• Employment Status: You were either a TAA/ATAA/RTAA recipient (trade-displaced worker certified by the Department of Labor) or a PBGC payee receiving pension benefits
• Age Limits (PBGC payees only): Between 55 and 65 years old and not enrolled in Medicare
• Not a Dependent: You couldn't be claimed as a dependent on anyone else's tax return
• Qualified Coverage: Your health insurance had to be COBRA, spousal employer coverage (where employer paid less than 50%), state-based continuation coverage, or a VEBA plan
• Coverage Restrictions: You were ineligible for any month where you had Medicare, Medicaid, CHIP, federal employee benefits (FEHBP), military coverage (TRICARE), or were imprisoned. You also couldn't use the credit for Marketplace (Obamacare) plans—those qualify for the Premium Tax Credit (Form 8962) instead, and you can't claim both credits for the same coverage.

Election Requirement

You had to actively elect to take the HCTC by checking boxes on Form 8885 for the months you're claiming. Once you elect for one month, the election automatically applies to all subsequent eligible months in that tax year. This election must be made by your tax return deadline (including extensions).

Step-by-Step (High Level)

Filing Form 8885 (High Level)

Step 1: Gather Your Documentation

Before starting the form, collect these essential documents:

• Official eligibility letter from the Department of Labor (for TAA/ATAA/RTAA) or Form 1099-R from PBGC (for pension recipients)
• Health insurance bills or COBRA payment coupons showing monthly premiums, coverage dates, your health plan name, and identification number
• Proof of payment: canceled checks (front and back), bank statements, credit card statements, or money orders showing you paid the premiums
• Form 1099-H if you received advance monthly payments (your insurance company or IRS would send this)

Step 2: Complete Part I – Election

Check the box for each month in 2019 where you met all eligibility requirements. You must check the first month you're electing the credit and every subsequent eligible month. Don't skip months in the middle—once you start the election, it continues through all remaining eligible months.

Step 3: Calculate Your Credit (Part II)

• Line 2: Enter the total premiums you paid directly to your health plan for all months checked in Part I. Don't include premiums paid to "US Treasury-HCTC" (advance payment program) or amounts shown on Form 1099-H.
• Line 3: Subtract any Archer MSA or Health Savings Account (HSA) distributions used for these premiums.
• Line 4: Subtract Line 3 from Line 2—this is your eligible premium amount.
• Line 5: Multiply Line 4 by 72.5% (0.725) to get your credit. However, if you received advance payments for months not checked on Line 1, you'll need to complete the Excess Advance HCTC Repayment Worksheet to reduce your credit by overpayments.

Step 4: Transfer to Main Tax Return

Enter the Line 5 amount on Schedule 3 (Form 1040 or 1040-SR), line 13, checking box c. This adds the credit to your total credits, reducing your tax owed or increasing your refund. IRS Form 8885

Step 5: Attach Required Documents

You must attach all supporting documentation listed in Step 1 to your tax return. If e-filing, include them as PDFs if your software allows, or mail them using Form 8453 within three days of e-filing. Without proper documentation, the IRS will disallow your credit.

Common Mistakes and How to Avoid Them

Mistake #1: Not Filing Form 8885 After Receiving Advance Payments

Many people who participated in the advance monthly payment program assume they don't need to file anything since they already received the benefit. Wrong. You must file Form 8885 to make the formal election, even if Line 5 calculates to zero. Without this election, those advance payments become taxable income you must repay. Solution: Always file Form 8885 if you received any advance payments during 2019, regardless of whether you're claiming additional credit.

Mistake #2: Including Ineligible Premium Amounts

Taxpayers often include premiums for coverage types that don't qualify, such as:

• Standalone dental or vision plans purchased separately
• Premiums paid to "US Treasury-HCTC" for the advance payment program
• Amounts already covered by Form 1099-H advance payments
• Coverage for family members who don't meet the qualifying criteria

Solution: Carefully review the qualified health insurance coverage definitions. Only include premiums for comprehensive health coverage that meets HCTC requirements, and exclude any amounts already subsidized through advance payments.

Mistake #3: Checking Boxes for Ineligible Months

Some filers check every month on Line 1 without verifying they met all eligibility conditions on the first day of each month. Common oversights include:

• Checking months where they had employer-sponsored coverage with 50%+ employer contribution
• Including months after enrolling in Medicare
• Claiming months where they were enrolled in Medicaid or CHIP

Solution: Review each month individually against the checklist on Form 8885, Part I. Only check months where you genuinely met every single requirement.

Mistake #4: Missing or Inadequate Documentation

The IRS is strict about documentation. Common errors include:

• Not attaching health insurance bills
• Providing proof of payment that doesn't show the amount or recipient
• Missing the eligibility certification letter from Department of Labor or PBGC
• Submitting documents that don't match the months claimed

Solution: Create a complete documentation package before filing. Each month claimed needs a corresponding insurance bill and payment proof. Double-check that all documents clearly show dates, amounts, and recipients.

Mistake #5: Confusing HCTC with Premium Tax Credit (PTC)

Marketplace coverage purchased through Healthcare.gov or state exchanges doesn't qualify for HCTC—it qualifies for the Premium Tax Credit (Form 8962). You cannot claim both credits for the same coverage in the same month. Solution: If you had Marketplace coverage, file Form 8962 instead. If you had both Marketplace and qualified HCTC coverage in different months, file both forms but coordinate them carefully following the special instructions in the Form 8885 instructions.

Mistake #6: Not Calculating Excess Advance Payment Repayments

If you received advance payments for months you weren't actually eligible (months not checked on Line 1), you must repay those amounts using the Excess Advance HCTC Repayment Worksheet. Many taxpayers skip this calculation. Solution: Compare your Form 1099-H to the months checked on Line 1. If you received payments for unchecked months, complete the repayment worksheet as instructed. IRS Form 8885 Instructions

What Happens After You File

Normal Processing Timeline: If your return is complete and accurate, the IRS typically processes it within the standard timeframe—21 days for e-filed returns, or 6-8 weeks for paper returns. Your HCTC from Line 5 gets added to other nonrefundable credits, reducing your tax liability or increasing your refund.

Documentation Review: The IRS examines the supporting documents you attached. Because HCTC claims require extensive proof, returns with Form 8885 may take slightly longer to process than typical returns. The IRS verifies your eligibility letter, insurance bills, and payment proofs match the amounts claimed.

IRS Correspondence: If the IRS identifies issues, you'll receive a letter—commonly Letter 12C requesting additional documentation or clarification. This doesn't necessarily mean you did something wrong; it might simply mean documents weren't clearly legible or specific information needs verification. Respond promptly with the requested materials to avoid credit denial.

Advance Payment Reconciliation: If you received advance monthly payments, the IRS cross-checks your Form 1099-H against your Form 8885 elections. Any discrepancies trigger automated reviews. If you received excess advance payments that you didn't properly account for, expect correspondence requesting repayment or adjustments to your return.

Credit or Refund Impact: Your Line 5 credit directly reduces your tax owed dollar-for-dollar. If your total credits exceed your tax liability, you'll receive a refund for the difference (the HCTC is refundable). For example, if you owed $5,000 in taxes and claimed a $7,250 HCTC, you'd receive a $2,250 refund (plus any withholding or other credits).

Audit Potential: While HCTC claims don't automatically trigger audits, incomplete documentation or suspicious patterns may prompt further review. The IRS is particularly vigilant about this credit because it involves substantial government payments. Keeping meticulous records protects you if questions arise months or even years later.

FAQs

Q1: Can I still claim the HCTC for 2019 if I didn't file it with my original return?

Yes, you can file an amended return (Form 1040-X) with Form 8885 attached. You generally have three years from the original filing deadline—so for 2019, until April 15, 2023 (or later if extensions applied). However, if you received advance payments during 2019 and didn't file the election form, address this immediately to avoid repayment issues.

Q2: What if I had both COBRA and Marketplace coverage during different months in 2019?

You can claim different credits for different coverage types in different months. Use Form 8885 for months with COBRA or other qualified HCTC coverage, and Form 8962 for months with Marketplace coverage. Never claim both credits for the same coverage in the same month—the IRS systems will flag this as an error.

Q3: My spouse and I are both eligible TAA recipients. Do we need two separate forms?

Yes. If both spouses are eligible recipients, each must complete their own Form 8885 showing their social security number, even if filing jointly. You'll attach both completed forms to your joint return. Each spouse calculates their credit separately based on premiums they personally paid.

Q4: I paid premiums for my family members. Can I include those amounts?

Yes, if your qualifying family members (spouse or dependents you can claim) met all eligibility requirements on the first day of each month. They must not have been enrolled in Medicare, Medicaid, CHIP, FEHBP, or TRICARE, and must have been covered by qualified health insurance for which you paid premiums. Include their premiums on Line 2 along with yours.

Q5: What happens if I accidentally claimed months when I wasn't actually eligible?

This is a serious error that requires correction. File an amended return (Form 1040-X) with a corrected Form 8885 as soon as you discover the mistake. The IRS will adjust your credit and may request repayment of overclaimed amounts plus interest. Acting proactively demonstrates good faith and may avoid penalties.

Q6: Can I deduct health insurance premiums on Schedule A if I claim the HCTC?

No double-dipping. You cannot deduct the same premiums as medical expenses on Schedule A if you claimed them for the HCTC. Additionally, if you're self-employed, you cannot include HCTC-claimed premiums in your self-employed health insurance deduction on Schedule 1. The IRS instructions specifically warn against this. IRS Form 8885 Instructions

Q7: I received a Form 1099-H but don't understand what it means. Do I still need to file Form 8885?

Absolutely. Form 1099-H reports advance monthly HCTC payments made on your behalf. You must file Form 8885 to elect the HCTC for those months, confirming you were eligible for the payments you received. Enter the Form 1099-H amounts in your calculations but don't include them again on Line 2—they were already paid directly to your insurer. Failing to file the election form means you'll owe those advance payments back as income.

Sources & Important Resources

• IRS Form 8885 (2019)
• Instructions for Form 8885 (2019)
• IRS HCTC Information

This summary provides general guidance. Tax situations vary significantly, and consulting a tax professional is recommended for complex scenarios involving the HCTC, especially when coordinating with other credits or dealing with advance payment reconciliations.