There's the version of tax resolution the late-night commercials sell you. Then there's how it actually works. I'm Darrin Mish, a Tampa tax attorney. I've spent 32 years on the inside of these cases. Here's the real version.
With the spiraling increase of healthcare and medical costs in the country, health insurance is no longer an option for most people. Some taxpayers are fortunate enough to be covered in their companies by their employers but not everyone has that benefit. If you are paying for your own health or medical insurance coverage, you should be aware of the health coverage tax credit you may be eligible for. Click here to read or watch more IRS Help resources.
The United States government in association with other federal agencies, state governments and private healthcare groups has formulated this credit to enable people to afford basic healthcare insurance coverage. If you are eligible, this tax credit may include your family members as well. Eligibility for this credit also depends on what type of health insurance you have. The health plan must be approved by the IRS in order for you to qualify for the health coverage tax credit. Also, you have to be paying at least 50% of the qualifying health insurance premium.
If you are eligible for it, the credit will pay 72.5% of your healthcare insurance premiums every year. Some categories of taxpayers are ineligible. These include those who are already enrolled in Medicare Part A, B, or C, Medicaid or the Children’s Health Insurance Program (CHIP). In addition, they cannot be enrolled in Federal Employees Health Benefits Program (FEHBP) or already be receiving military healthcare benefits under the US military health system (TRICARE).
Those who are incarcerated in federal, state or local prisons are not eligible for the health coverage tax credit, neither are those who are being claimed as a dependent on someone else’s return. Another category of those taxpayers who are ineligible are those receiving a 65% COBRA Premium Reduction.
On the other hand, you must also be
• a beneficiary under the Pension Benefit Guaranty Corporation (PBGC) or other trade-related government agency who is 55 years old or older
• a recipient under the Trade Adjustment Assistance (TAA), Alternative TAA (ATAA), or Reemployment TAA (RTAA) or
• a qualified family member of a taxpayer who is eligible under one of the categories listed above at the time of Medicare enrollment, death, or divorce.
If you are eligible for the health coverage tax credit, the IRS will mail you a kit for you to claim your credit. To do so, complete IRS Form 8885 and submit it with their personal tax returns. You may claim your credit in monthly installments or collect it yearly. If you choose the yearly option, you pay your insurance premium first then fill in and submit IRS Form 8885 to claim the refundable credit on your federal income tax return.