Instructions for Form 8885 Checklist — Tax Year 2016
Form 8885 allows eligible individuals to claim the Health Coverage Tax Credit for the 2016 tax
year. This refundable tax credit equals 72.5% of qualified health insurance premiums paid during eligible months.
Understanding HCTC Eligibility for 2016
You can claim the Health Coverage Tax Credit only if you meet specific eligibility requirements established by federal tax legislation. You must have been an eligible Trade Adjustment
Assistance recipient, Alternative TAA recipient, Reemployment TAA recipient, or Pension
Benefit Guaranty Corporation payee during 2016.
Qualifying family members of eligible individuals who passed away or finalized a divorce may also claim the credit. In 2016, you were not eligible to be claimed as a dependent on the tax return of another individual.
Eligibility extends only to individuals who paid premiums for qualified health coverage during eligible months. You cannot claim the credit for any month when you were enrolled in Medicare
Part A, Medicare Part B, Medicare Part C, Medicaid, the Children’s Health Insurance Program, or the Federal Employees Health Benefits Program.
Supporting Documentation to Substantiate a Claimed
Dependent
- An official eligibility letter from the Department of Labor, a state workforce agency, or a
- A copy of the 2016 Form 1099-R issued by the Pension Benefit Guaranty Corporation
- Copies of health insurance bills or COBRA payment coupons must be included for each
- Acceptable proof of payment includes canceled checks, bank statements, credit card
Step 1: Gather Required Documentation for Your Tax Return
Collect all necessary documents before completing Form 8885 to ensure accurate reporting and proper substantiation. You must attach specific documentation to your income tax return to support your claim for the Health Coverage Tax Credit.
For TAA, ATAA, or RTAA recipients: local employment office is required to substantiate eligibility for the HCTC.
For PBGC payees: must be provided to document pension benefits received during the year.
For all eligible individuals: month claimed on line 2 of Form 8885 to support qualified premium amounts. statements, or money order receipts showing payment of the reported premiums.
Step 2: Locate Your 2016 Advance Payment Documentation
The IRS implemented an interim advance monthly payment program beginning in July 2016 with participating health plan administrators. Under this program, the IRS makes advance payments directly to your health plan administrator on your behalf.
If you participated in the advance monthly payment program during 2016, your health plan administrator sent you Form 1099-H. This form shows the advance HCTC payments the IRS made to your health plan administrator. Do not include premiums for months covered by advance payments when entering amounts on line 2 of Form 8885.
- Qualified health insurance coverage includes COBRA continuation coverage as defined
- Coverage under a group health plan available through a spouse’s employment qualifies,
- Non-group individual health insurance plans qualify when they are not offered through
- Qualified coverage also includes state-based health insurance, such as continuation
- Coverage funded by a voluntary employees’ beneficiary association established through
Step 3: Identify Qualified Health Insurance Coverage
Understanding which health coverage qualifies for the Health Coverage Tax Credit ensures accurate completion of Form 8885. Coverage under a qualified health plan offered through the
Health Insurance Marketplace does not qualify for the HCTC in 2016. in section 9832(d)(1) of the Internal Revenue Code. provided the coverage is subject to applicable employer contribution limits. the Health Insurance Marketplace. coverage required by state law and coverage provided through qualified state high-risk pools. bankruptcy qualifies as eligible health insurance coverage.
Exclude separately purchased dental or vision coverage where substantially all benefits consist of excepted benefits. Also, exclude premiums paid from Archer Medical Savings Account or
Health Savings Account distributions when calculating your credit.
Step 4: Complete Form 8885 Part I Election
Check the box on line 1 for the first eligible coverage month you elect to take the HCTC. All statements listed on line 1 must be true as of the first day of each month you check.
You must then check every box for each subsequent eligible coverage month through the end of
2016. Once you elect to take the HCTC for a month in 2016, the election applies to all subsequent eligible coverage months.
Filing Form 8885 is required for any months you participated in the advance payment program, even if you are not claiming additional credit. This election ensures you receive the full benefit of the Health Coverage Tax Credit for all qualifying periods.
Step 5: Calculate Your Health Coverage Tax Credit
Form 8885 Part II contains lines 2 through 5 for calculating the credit amount you can claim on your Form 1040. Each line serves a specific purpose in determining your final Health Coverage
Tax Credit.
Line 2: Enter the total amount of health insurance premiums you paid directly to your health plan for eligible months. Do not include premiums for months when you received advance monthly payments.
Line 3: Enter any Archer Medical Savings Account or Health Savings Account distributions you used to pay for qualified health insurance coverage.
Line 4: Subtract line 3 from line 2 and enter the result.
Line 5: Multiply the amount on line 4 by 72.5% and enter the result, which represents your
Health Coverage Tax Credit.
- Full IRS transcript retrieval (Wage & Income + Account)
- Professional tax form review
- Preparation & filing support
- Tax relief options if you owe the IRS
Step 6: File Form 8885 With Your Tax Return
File Form 8885 with your completed 2016 Form 1040, Form 1040-NR, Form 1040-SS, or Form
1040-PR. You cannot file Form 8885 separately from your income tax return.
Attach all required supporting documentation, including eligibility letters, health insurance bills, and proof of payment, to substantiate reported amounts. Enter the amount from Form 8885, line
5, on the designated line of your Form 1040. Your tax return remains incomplete without proper documentation attached to Form 8885.
Year-Specific 2016 Updates and Clarifications
The 2016 instructions clarify that coverage under qualified health plans offered through the
Health Insurance Marketplace does not qualify for the HCTC. An interim advance monthly payment program began in July 2016 with a limited number of health plan administrators participating.
Form 1099-H is issued to recipients by participating health plan administrators, who receive advance HCTC payments directly from the IRS. Instructions for 2016 clarify the treatment of
Medicaid coverage during the year and its impact on HCTC eligibility.
Individuals enrolled in Medicaid or the Children’s Health Insurance Program during a month are not eligible for the HCTC for that month. Form 8885 itself does not require household income reporting or income-based reconciliation calculations, unlike other health coverage tax credits.
If you’re missing tax documents or want to ensure the numbers you enter match IRS records, we can help.
