What is Form 8885?
Form 8885, Health Coverage Tax Credit, is a form issued by the IRS to help taxpayers to calculate the value, if any, of their Health Coverage Tax Credit (HCTC).
Health Coverage Tax Credit is a refundable tax credit that is 72.5% of qualified health insurance premiums for an eligible taxpayer or their family members. The 8885 tax form is the document used to claim this tax credit.
To qualify for HCTC, and have your Form 8885 IRS approved, you must meet at least the following criteria:
- You are a candidate for the Trade Adjustment Assistance Program and have received a Trade Readjustment Allowance.
- You are entitled to receive Trade Readjustment Allowance but you have not exhausted your unemployment insurance yet.
- You received benefits under the Alternative Trade Adjustment Assistance program.
- You received benefits from the Reemployment Trade Adjustment Assistance program.
- You are between 55 and 64 years old and have received pension benefit payments from the Pension Benefit Guarantee Corporation.
In addition, you will not be qualified for an HCTC and you will not have your 8885 Form IRS approved if you meet any of these criteria, regardless you have met any criteria above.
- You can be considered dependent on another person’s tax return.
- You are enrolled in Medicare, Medicaid, the Children’s Health Insurance Program, or the Federal Employees Health Benefits Program.
- You are eligible to receive benefits under the U.S. military health system (TRICARE).
- You have purchased health insurance through Healthcare.gov or any state marketplace.
For family members, you can file a separate 8885 Form if they qualify for an HCTC, To qualify, they must be one of the following:
- Your current spouse
- Your spouse will not qualify if they file their taxes separately from you
- Any family member or relative that you can claim as dependent on your tax returns
Your family members can also be disqualified if they fall under the criteria for disqualification mentioned earlier. Furthermore, you and your family members can be under different coverages which is why you can still receive HCTC for the healthcare plans of qualifying family members even though you are not qualified for your HCTC.
Federal Tax Form 8885 must be filed with your Form 1040, Income Tax Return, or Form 1040-SR, Income Tax Return for Seniors. These forms must be filed on or before the calendar year’s Tax Day.
How to fill out Form 8885?
Taxpayers who are required to file IRS Form 8885 can find and download a PDF copy of the form from the official IRS government website to fill out manually. Alternatively, you can also fill out the form electronically using PDFRun.
Name of Recipient
Input your name. If you are filing for a family member, input their name instead.
If you are filing for more than one person, you must file separate forms for each HCTC.
Recipient’s Social Security Number
Input your or the recipient’s social security number
Part I - Election to Take the Health Coverage Tax Credit
Check the month for the first month in your tax year you decide to use your Health Coverage Tax Credit. All of the statements below must be true for you of the recipient on the first day of that month moving forward.
- You were an eligible trade adjustment assistance (TAA) recipient, alternative TAA (ATAA) recipient, reemployment TAA (RTAA) recipient, or Pension Benefit Guaranty Corporation (PBGC) payee; or you were a qualifying family member of an individual who fell under one of the categories listed above when he or she passed away or with whom you finalized a divorce.
- You and/or your family member(s) were covered by HCTC-qualified health insurance coverage for which you paid the entire premiums, or your portion of the premiums, directly to your health plan or to “US Treasury-HCTC.”
- You were not enrolled in Medicare Part A, B, or C, or you were enrolled in Medicare but your family member(s) qualified for the HCTC.
- You were not enrolled in Medicaid or the Children’s Health Insurance Program (CHIP). •
- You were not enrolled in the Federal Employees Health Benefits Program (FEHBP) or eligible to receive benefits under the U.S. military health system (TRICARE).
- You were not imprisoned under federal, state, or local authority.
- Your or your spouse’s employer (or former employer) did not pay 50% or more of the cost of coverage.
- You did not receive a 100% COBRA premium reduction from your former employer or COBRA administrator.
In addition, if all of the statements remain true for some months after the first month you checked, check those months as well.
Part II - Health Coverage Tax Credit
This is where you will calculate your total Health Coverage Tax Credit.
Input the total amount you have paid to an HCTC-qualified health insurance agency for all the months you checked at Line 1. Do not include amounts that fall under the following:
- Paid insurance premiums to “US Treasury-HCTC”
- Any advance monthly payments paid on your behalf as mentioned in Form 1099-H, Health Coverage Tax Credit (HCTC) Advance Payments.
- Any insurance premiums you have paid for which you received reimbursement from the HCTC during the year by filing Form 14095, Health Coverage Tax Credit Reimbursement Request Form.
The written amounts must be validated by the following documents:
- An official letter verifying that you are eligible for the months you have listed.
- A copy of your health insurance bills for each month you are claiming the credit on Line 2. The bills must include the following information:
- Your name (or name of the policyholder),
- The name of your health plan,
- Your monthly premium amount,
- Dates of coverage, and
- Your health plan identification number(s).
- Proof of payment for each month. These can be any of the following:
- Canceled checks (front and back)
- Bank Statements
- Credit Card Statements
- Money Orders
All of these documents for each health plan must be attached to Form 8885 upon filing, Otherwise, your HCTC will be disallowed.
Input the total amount of all Archer MSA or health savings distribution. Used to pay for your HCTC-qualified health insurance coverage for the months mentioned in Line 1
Subtract Line 3 from Line 2. Input the difference.
Multiply Line 4 by 72.5% (0.725). Enter the result here and on your respective tax return forms. If the result is zero or negative, you cannot claim your HCTC on your tax return.
If you received any of the following for any months outside of the ones you have checked in Line 1, you must subtract the total amount of it from the product.
- an excess advance monthly payment of the HCTC if you received the benefit of an advance monthly payment
- reimbursement of the HCTC during the year by filing Form 14095 for any month not checked on line 1