The Trade Preferences Extension Act of 2015

The Trade Preferences Extension Act of 2015 (Public Law 114-27), enacted June 29, 2015, extended and modified the expired Health Coverage Tax Credit (HCTC). Previously, those eligible for the HCTC could claim the credit against the premiums they paid for certain health insurance coverage through 2013. The HCTC can now be claimed for coverage through 2019.

The IRS is currently reviewing the legislation and is working with its partners, the Pension Benefit Guaranty Corporation, the Department of Labor, and State Workforce Agencies, to determine the best way for taxpayers to receive this important credit. The law is similar to the version of the credit that expired in 2013 but includes modifications that affect how the credit is administered. The IRS will provide guidance on the credit in the near future, including guidance for taxpayers who also qualify for the Premium Tax Credit under the Affordable Care Act.

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Claiming the Health Coverage Tax Credit for Tax Year 2014

The HCTC, which expired after 2013, has been reinstated retroactive to January 1, 2014, with modifications. If you were an eligible trade adjustment assistance (TAA) recipient, alternative TAA recipient, reemployment TAA recipient, Pension Benefit Guaranty Corporation pension payee, or a qualifying family member, you may be able to claim the HCTC for qualifying health insurance coverage during 2014.

Beginning Dec. 1, 2015, the IRS will accept amended returns with tax year 2014 HCTC claims.  You must follow the special instructions for amending your tax return, and include specific documentation with your Form 1040X Amended U.S. Individual Income Tax Return, and Form 8885, Health Coverage Tax Credit. Taxpayers who claimed or reconciled the premium tax credit in 2014 have additional specific instructions that they must follow to claim the HCTC.

Refer to these Questions and Answers for more information about how to amend your tax year 2014 return to claim the Health Coverage Tax Credit.

 

2016 HCTC Qualified Health Insurance Plans

Taxpayers eligible for the HCTC should ensure that they are enrolled in health care coverage for 2016 that qualifies for the HCTC before 2016 begins, because many plans require participants to enroll before the end of 2015.

Although qualified health plans offered through the Health Insurance Marketplace qualify for the HCTC for 2014 and 2015, Marketplace plans don’t qualify for the HCTC in 2016. Advance payments (monthly option) of the HCTC are planned to begin July 2016. The legislation allows IRS one year to implement the monthly option.

If you are eligible for both the HCTC and the premium tax credit (PTC), you may choose Marketplace coverage for the first part of 2016 to receive advance payments of the premium tax credit (APTC) even though Marketplace coverage isn’t eligible for the HCTC in 2016. You may then switch coverage into an HCTC-eligible plan after advance payments of the HCTC begin.

Refer to these Questions and Answers for further guidance on the types of health insurance coverage that qualify for the HCTC in 2016.

Background of the HCTC

The Health Coverage Tax Credit is a federally funded tax credit that allows individuals to pay only a portion of their qualified health insurance. The HCTC helps make health coverage more affordable for eligible individuals and their families by paying a significant portion of qualified health insurance premiums.

Certain displaced workers are certified by the Department of Labor as eligible to receive Trade Readjustment Allowances under the Trade Adjustment Assistance program. Others may be eligible because they receive benefits from the Pension Benefit Guaranty Corporation and are 55 years old or older. If you can be claimed as a dependent on another person’s federal income tax return, you are not a candidate for the HCTC.

HCTC Program Timeline

• 2002: HCTC began as a ground breaking tax credit program.
• August 2003: HCTC was first made available as an advance payment on a monthly basis.
• May 2009: Benefits expanded under American Recovery and Reinvestment Act. These benefits were set to expire on December 31, 2010.
• December 2010: Congress passed a short term extension of the changes made to the HCTC by the ARRA. These provisions expired on February 13, 2011.
• October 2011: Benefits again expanded by the Trade Adjustment Assistance Act of 2011.
• January 1, 2014: The legislation that authorized the HCTC expired. This expiration date was set by Congress when the Trade Adjustment Assistance Extension Act of 2011 was passed.
• June 29, 2015: The Trade Preferences Extension Act of 2015 (Public Law 114-27), enacted June 29,2015, extended and modified the expired HCTC through 2019.
•  Dec. 1, 2015: IRS accepts amended returns with tax year 2014 HCTC claims.