The Health Coverage Tax Credit (HCTC): In Brief

Summary

The Health Coverage Tax Credit (HCTC) subsidizes most of the cost of qualified health insurance for eligible taxpayers and their family members. Potential eligibility for the HCTC is limited to two groups of taxpayers. One group is comprised of individuals eligible for Trade Adjustment Assistance (TAA) allowances because they experienced qualifying job losses. The other group consists of individuals whose defined-benefit pension plans were taken over by the Pension Benefit Guaranty Corporation (PBGC) because of financial difficulties. HCTC-eligible individuals are allowed to receive the tax credit only if they either could not enroll in certain other health coverage (e.g., Medicaid) or are not eligible for other specified coverage (e.g., Medicare Part A).

To claim the HCTC, eligible taxpayers must have qualified health insurance (specific categories of coverage, as specified in statute). Several of those categories, known as state-qualified health plans, are available only after being established by state action.

The HCTC is refundable, so eligible taxpayers may receive the full credit amount even if they had little or no federal income tax liability. The credit is also advanceable, so taxpayers may receive the credit on a monthly basis to coincide with the payment of premiums.

The HCTC has a sunset date of January 1, 2020.