Form 8885 (2018)—Health Coverage Tax Credit
Purpose & 2018-Specific Context
Form 8885 allows eligible individuals to claim a refundable tax credit for health coverage premiums. This credit is available to eligible trade adjustment assistance (TAA), alternative TAA (ATAA), reemployment TAA (RTAA), or Pension Benefit Guaranty Corporation (PBGC) payees, as well as their qualifying family members.
In 2018, the credit rate remained fixed at 72.5% of net premiums paid directly to health plans or the US Treasury-HCTC, with no inflation adjustment to eligibility thresholds or credit percentage for that year.
Filing Steps
Step 1: Confirm Your Eligibility Status
Verify that you were an eligible TAA, ATAA, RTAA, or PBGC recipient as of the first day of each month you elect to claim the credit in 2018. You may also qualify as a qualifying family member of a deceased or divorced eligible individual. If your eligibility status changed during the year, your elections reflect only those months when eligibility was continuous.
Step 2: Verify Medicare Enrollment Status
Confirm you were not enrolled in Medicare Part A, B, or C during any month you plan to check on line 1. However, if you are an eligible TAA, ATAA, RTAA recipient or PBGC payee who enrolled in Medicare, you may still claim the HCTC for your qualifying family members who are not enrolled in Medicare. This family member coverage is available for up to 24 months from the month you enrolled in Medicare.
Step 3: Check Federal and State Program Enrollment
Confirm that neither you nor your spouse was enrolled in Medicaid, the Children’s Health Insurance Program (CHIP), the Federal Employees Health Benefits Program (FEHBP), or eligible to receive benefits under the US military health system (TRICARE) during any elected month. Enrollment in these programs disqualifies you from claiming the credit for those months, even if coverage was short-term.
Step 4: Review Employer-Sponsored Coverage Rules
The employer contribution rules vary depending on your eligibility category. For TAA recipients and PBGC payees, you cannot claim the credit if your employer or former employer paid 50% or more of your coverage cost.
For ATAA and RTAA recipients, the rules are stricter: you are ineligible if you were eligible for qualified health insurance coverage where the employer would have paid 50% or more, or if you were covered under any qualified health insurance coverage. The employer paid any part of the cost. Any amounts you or your spouse contributed on a pre-tax basis are considered employer contributions.
Step 5: Confirm Dependent Status
Ensure you cannot be claimed as a dependent on another person’s 2018 tax return. If you can be claimed as a dependent, you are not eligible to file Form 8885 and claim the HCTC, even if you otherwise meet all other requirements.
Step 6: Make Your Election Online 1
Check the box on line 1 for the first eligible coverage month you elect to take the HCTC. All statements listed on the form must be true as of the first day of that month. You must also check the box for each month after your election month for which all statements remain true, even if you are not claiming the credit for those months.
Once you elect to take the HCTC for a month in 2018, the election applies to all subsequent eligible coverage months in 2018. The election must be made no later than the due date, including extensions, of your tax return.
Step 7: Calculate Eligible Premiums on Line 2
Enter on line 2 only the total amount of insurance premiums you paid directly to your health plan for coverage for you and all qualifying family members under qualified health insurance coverage for all eligible coverage months checked on line 1. Do not include any premiums paid to the US Treasury-HCTC as part of the advance monthly payment program.
Also, exclude any advance monthly payments shown on Form 1099-H, box 1, or any insurance premiums you paid for which you received a reimbursement of the HCTC during the year by filing Form 14095. If your qualified health insurance coverage covers anyone other than you and your qualifying family members, determine which amounts are considered paid for your coverage by consulting IRS Publication 502.
Step 8: Account for MSA and HSA Distributions on Line 3
Report on line 3 any Archer Medical Savings Account (MSA) or Health Savings Account (HSA) distributions you used specifically to pay premiums for the eligible coverage months checked on line 1. These distributions must be subtracted from your total premiums to determine your net eligible amount.
Step 9: Calculate Net Premiums on Line 4
Subtract line 3 from line 2 and enter the result on line 4, ensuring the amount is not less than zero. This represents your net qualified health insurance premiums eligible for the credit after accounting for any MSA or HSA distributions used to pay those premiums.
Step 10: Calculate Your Credit on Line 5
If you received the benefit of the advance monthly payment program for any month not checked on line 1, or received a reimbursement of the HCTC during the year by filing Form 14095 for any month not checked on line 1, you must use the Excess Advance HCTC Repayment Worksheet in the instructions to calculate line 5.
Otherwise, multiply the amount on line 4 by 72.5% (0.725). Enter the result on Form 8885, line 5.
Step 11: Transfer Credit to Your Tax Return
After calculating your credit on line 5, transfer this amount to the appropriate line on your tax return.
For Form 1040 filers, enter the amount on Schedule 5 (Form 1040), line 74, and check box c. For Form 1040NR filers, enter it on line 69 and check box c. For Form 1040-SS or Form 1040-PR filers, enter it on line 10. This credit is refundable, meaning you can receive it even if you owe no tax.
Step 12: Gather Required Documentation
You must provide verifiable proof for each month you are claiming the credit on line 2. Required documents include an official letter reflecting your eligibility for the months claimed, copies of your health insurance bills or COBRA payment coupons showing your name, health plan name, monthly premium amount, dates of coverage, and health plan identification numbers, and proof of payment such as canceled checks, bank statements, credit card statements, or money orders.
No documents are required if you file Form 8885 only to elect the HCTC for months you participated in the advance monthly payment program.
Step 13: Attach Documentation to Your Return
Attach all required supporting documentation to your paper Form 1040, Form 1040NR, Form 1040-SS, or Form 1040-PR. If you e-file your return, you can attach copies of the required documents as a PDF if your tax software supports this option; otherwise, you must attach the documents to Form 8453, US Individual Income Tax Transmittal for an IRS e-file Return, and mail them to the IRS following the instructions provided for that form.
Missing attachments may result in credit disallowance without further notice during 2018 processing.
Step 14: Understand Marketplace Coverage Interactions
A qualified health plan offered through a Health Insurance Marketplace is not qualified health insurance coverage for the HCTC in 2018. You cannot take the premium tax credit (PTC) for any months checked on line 1 of Form 8885. However, subject to general eligibility and election rules, you may be able to claim the PTC and the HCTC in the same month for different coverage.
For example, if you elect the HCTC for self-only COBRA coverage in a month, you can take the PTC for the Marketplace coverage of your family members for that same month if they are otherwise eligible.
Step 15: File Even for Advance Payment Program Participants
Even if you cannot claim the HCTC on your income tax return because your resulting amount from line 5 is negative, zero, or blank, you must still file Form 8885 to elect the HCTC for any months you participated in the advance monthly payment program. Failing to make a timely election will require you to report advance monthly HCTC payment amounts as an additional tax owed on your tax return.
2018 Year-Specific Changes & Guidance
The 72.5% credit percentage for 2018 remained unchanged from prior years, with no annual adjustment applied to the rate or eligibility thresholds. Form 1099-H reporting for advance monthly HCTC payments was required in 2018. Amounts shown on Form 1099-H must not be included on line 2 to avoid double crediting.
Residents filing Form 1040-PR (for Puerto Rico residents with self-employment income) and Form 1040-SS (for self-employed individuals in US territories or certain non-residents) had alternative lines for reporting the credit. They would enter the credit amount on line 10 of their respective forms, distinct from the Schedule 5 reporting used by Form 1040 filers.
The standard eligibility rules prohibiting enrollment in federal or state health programs such as Medicare, Medicaid, CHIP, FEHBP, and TRICARE applied throughout 2018 with no temporary waivers. Form 14095 reimbursement claims allowed taxpayers to recover HCTC credits for retroactive periods. Amounts already reimbursed via Form 14095 were excluded from line 2 calculations to prevent duplicate credits.
The Form 1040 was redesigned for 2018, with the previous Form 1040A and Form 1040EZ discontinued. The new design introduced supplemental Schedules 1 through 6 to accommodate various tax situations. Form 8885 filers used Schedule 5 to report their health coverage tax credit alongside other tax credits not entered directly on Form 1040.
Need Help With Your Tax Filing?
If you’re missing tax documents or want to ensure the numbers you enter match IRS records, we can help.
We offer:
- Full IRS transcript retrieval (Wage & Income + Account)
- Professional tax form review
- Preparation & filing support
- Tax relief options if you owe the IRS
Call now before filing: (888) 260-9441
Fast transcript pull available
This checklist is for educational purposes only and does not constitute tax or legal advice. Always review official IRS instructions and consult a qualified professional for guidance.
