Form 8885 (2019)—Health Coverage Tax Credit
Purpose
Form 8885 allows eligible TAA, ATAA, RTAA recipients, and PBGC payees to claim a refundable credit equal to 72.5% of HCTC-qualified health insurance premiums paid directly to insurers. For 2019, the credit rate remains 72.5%, and recipients must verify their eligibility through monthly checkboxes corresponding to continuous coverage periods without enrollment in Medicare, Medicaid, CHIP, FEHBP, or TRICARE.
Eligibility Requirements
Who Can Claim This Credit
You can elect to take the HCTC only if you cannot be claimed as a dependent on someone else’s 2019 tax return, and you were either an eligible TAA, ATAA, or RTAA recipient or PBGC payee, or you were the qualifying family member of an eligible individual who passed away or finalized a divorce with you.
Qualifying Family Members
A qualifying family member includes your spouse (excluding those legally separated under a decree of divorce or separate maintenance) or anyone you can claim as a dependent. Qualifying family members of deceased or divorced TAA, ATAA, or RTAA recipients or PBGC payees may file Form 8885 separately and receive the tax credit for eligible coverage months up to 24 months from the death or divorce, or until December 31, 2019, whichever comes first.
Eight Mandatory Eligibility Conditions
For each month you check on Part I, all eight of the following statements must be true as of the first day of that month:
Status Requirement: You were an eligible TAA, ATAA, or RTAA recipient or PBGC payee as of the first day of the month.
Premium Payment: You paid the entire premiums, or your portion of the premiums, directly to your health plan for HCTC-qualified health insurance coverage.
Medicare Exclusion: You were not enrolled in Medicare Part A, B, or C, unless your qualifying family members qualified for the HCTC separately.
Medicaid and CHIP Exclusion: You were not enrolled in Medicaid or the Children’s Health Insurance Program. Any month of enrollment disqualifies that month’s credit claim.
Federal Program Exclusion: You were not enrolled in the Federal Employees Health Benefits Program or eligible to receive benefits under the U.S. military health system (TRICARE).
Imprisonment Exclusion: You were not imprisoned under federal, state, or local authority.
Employer Contribution Limits: This requirement differs by recipient type. For TAA recipients and PBGC payees, your or your spouse’s employer or former employer did not pay 50% or more of the cost of coverage. For ATAA and RTAA recipients, the rules are more restrictive: you cannot have been covered under any qualified health insurance coverage where the employer paid any part of the cost, and you cannot have been eligible for qualified health insurance coverage where the employer would have paid 50% or more of the cost.
COBRA Premium Reduction: You did not receive a 100% COBRA premium reduction from your former employer or COBRA administrator.
Filing Steps
Step 1: Verify Dependent Status
Confirm you cannot be claimed as a dependent on another person’s 2019 return. Dependents are prohibited from filing Form 8885 under the 2019 instructions.
Step 2: Confirm Eligibility Status
Verify your status as a TAA, ATAA, RTAA recipient, or PBGC payee as of the first day of the first month you elect the credit. Alternatively, confirm qualifying family membership through the death or divorce of the primary recipient.
Step 3: Review Monthly Eligibility Requirements
Review all eight mandatory eligibility conditions listed above for the first election month and each subsequent month. Ensure all conditions are satisfied as of the first day of each month.
Step 4: Complete Part I Monthly Election
Check the appropriate month box on Part I (January through December) for each month in your 2019 tax year when all eight eligibility conditions were satisfied as of the first day of that month. Once you elect to take the HCTC for a month in 2019, the election applies to all subsequent eligible coverage months in 2019.
Step 5: Calculate Eligible Premium Payments
On Part II, line 2, enter the total premiums paid directly to your health plan for HCTC-qualified coverage corresponding only to checked months. Exclude premiums paid to “US Treasury-HCTC” and exclude advance monthly payments shown on Form 1099-H received during 2019. Also, exclude any insurance premiums for which you received a reimbursement of the HCTC during the year by filing Form 14095.
Step 6: Report MSA or HSA Distributions
On line 3, report any Archer MSA or Health Savings Account distributions you withdrew and used to pay HCTC-qualified premiums for checked months only.
Step 7: Calculate Net Premium Amount
Subtract line 3 from line 2 and enter the result on line 4. The minimum amount is zero.
Step 8: Calculate Credit Amount
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, use the Excess Advance HCTC Repayment Worksheet to figure the amount. Otherwise, multiply line 4 by 72.5% (0.725) and enter the credit on line 5.
Step 9: Report on Tax Return
Report the amount from line 5 on Schedule 3 (Form 1040 or 1040-SR), line 13; Form 1040-NR, line 69; Form 1040-SS, line 10; or Form 1040-PR, line 10.
Step 10: Attach Required Documentation
Attach all required supporting documents listed in the 2019 Form 8885 instructions to substantiate amounts on line 2. Required documents include an official letter reflecting TAA, ATAA, RTAA, or PBGC eligibility; copies of health insurance bills or COBRA payment coupons showing plan name, monthly premium amount, dates of coverage, and plan identification number; and proof of payment such as canceled checks, bank statements, credit card statements, or money orders. Failure to attach these documents will result in the denial of the credit.
2019 Year-Specific Updates
Credit Percentage
The 72.5% credit percentage for 2019 remains fixed at this rate with no inflation adjustment or change from prior years.
Form 1099-H Exclusions
Form 1099-H reporting of advance monthly payments is incorporated into the 2019 instructions as an exclusion from line 2. Section 35 advance monthly payments must not be included in net premium amounts.
Tax Return Reporting
Schedule 3 (Form 1040), line 13, is the required reporting line for the 2019 tax year. This line designation is specific to the 2019 Form 1040 and Schedule 3 redesign.
Qualifying Family Member Clarification
The IRS clarified in 2019 instructions that qualifying family members of deceased TAA, ATAA, or RTAA recipients or divorced individuals may file Form 8885 separately, requiring identification of the relationship and the primary recipient’s status.
Medicaid and CHIP Rules
Medicaid and CHIP ineligibility rules are strictly enforced on Form 8885 for 2019. Any month of Medicaid or CHIP enrollment disqualifies that month’s credit claim.
HCTC Extension
While the original 2019 instructions stated the HCTC expired at the end of 2019, subsequent legislation extended the HCTC through December 31, 2020. The IRS issued a cover sheet update on March 31, 2020, confirming the extension. The advance monthly payment program also continued through 2020.
Qualified Health Insurance Coverage
Eligible Coverage Types
Qualified health insurance coverage for the HCTC includes coverage under a group health plan available through the employment of your spouse (subject to employer contribution limits), coverage under a non-group individual health insurance plan (excluding plans connected with group health plans or federal or state-based coverage), COBRA continuation coverage, state-based coverage including state continuation coverage and qualified state high-risk pools, and coverage under a health plan funded by a voluntary employees’ beneficiary association established through bankruptcy court.
Coverage Exclusions
Qualified health plans offered through a Marketplace are not qualified health insurance coverage for the HCTC in 2019. Also excluded are flexible spending arrangements, insurance where substantially all coverage consists of excepted benefits (such as standalone dental or vision plans), and certain state-based coverage that does not meet statutory requirements.
Special Rules
Employer-Sponsored Coverage Rules for ATAA and RTAA Recipients
ATAA and RTAA recipients face more restrictive employer-sponsored coverage rules than TAA recipients and PBGC payees. Do not check the box for any month if you were an eligible ATAA or RTAA recipient and either you were eligible for qualified health insurance coverage where the employer would have paid 50% or more of the cost, or you were covered under any qualified health insurance coverage where the employer paid any part of the cost.
Pre-Tax Contributions
Any amounts contributed to the cost of coverage by you or your spouse on a pre-tax basis are considered to have been paid by the employer. If you paid coverage premiums through pre-tax payroll deductions, these amounts count toward employer contributions when determining eligibility.
Medicare Enrollment and Family Coverage
If you are an eligible TAA, ATAA, or RTAA recipient or PBGC payee who enrolled in Medicare, you may be able to take the HCTC for coverage of qualifying family members. You can receive the HCTC for the health plan premiums of your qualifying family members for eligible coverage months up to 24 months from the month you enrolled in Medicare, or until December 31, 2019, whichever comes first.
Coordination with Premium Tax Credit
You cannot take the premium tax credit for any months checked on line 1. However, subject to general eligibility rules, you may claim the PTC and the HCTC in the same month for different coverage. Special instructions apply when completing Form 8962 if you elected to take the HCTC for at least one month, and individuals covered under qualified health insurance coverage for the HCTC were also enrolled in a Marketplace-qualified health plan for at least one other month.
Children of Divorced or Separated Parents
Even if you cannot claim your child as a dependent, they are treated as your qualifying family member for the HCTC if you were the child’s custodial parent and the child’s other parent can claim the child as a dependent under the rules for children of divorced or separated parents.
Election Requirement for Advance Payment Participants
Even if you cannot claim the HCTC on your income tax return, 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 advanced monthly HCTC payment amounts as additional tax owed on your tax return.
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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.
