8885 Health Coverage Tax Credit

2007 Form 8885
Health Coverage Tax Credit
Purpose:

This is the first circulated draft of the 2007 Form 8885, Health
Coverage Tax Credit. The major changes are discussed below.

TPCC Meeting:

None scheduled, but may be arranged if requested.

Instructions:

The 2007 Instructions for Form 8885 are included.

Prior Revisions:

The 2006 Form 8885 and its instructions can be viewed by clicking on the
following link:
http://www.irs.gov/pub/irs-pdf/f8885.pdf

Other Products:

Circulations of draft tax forms, instructions, notices, and publications are
posted at http://taxforms.web.irs.gov/draft_products.html.

Comments:

Please call, mail, email, or fax any comments by Monday, July 9, 2007.
Major Changes

1.

All year references have been changed.

FROM:

EMAIL:

PHONE:

FAX:

ROOM:

[email protected]

202-293-2926

202-283-7008

C7-261

Paul. W. Miller
SE:W:CAR:MP:T:I:F

DATE:

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I.R.S. SPECIFICATIONS

TO BE REMOVED BEFORE PRINTING

INSTRUCTIONS TO PRINTERS
FORM 8885, PAGE 1 of 4
MARGINS: TOP 13 mm (1⁄ 2 "), CENTER SIDES.
PRINTS: HEAD TO HEAD
PAPER: WHITE WRITING, SUB. 20.
INK: BLACK
FLAT SIZE: 203 mm (81⁄ 2 ") 3 279 mm (11")
PERFORATE: ON FOLD

8885

Department of the Treasury
Internal Revenue Service

Date

Signature

O.K. to print

DO NOT PRINT — DO NOT PRINT — DO NOT PRINT — DO NOT PRINT

Form

Action

Revised proofs
requested

OMB No. 1545-0074

Health Coverage Tax Credit
©

2007

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Attachment
Sequence No.

Attach to Form 1040, Form 1040NR, Form 1040-SS, or Form 1040-PR.

Name of recipient (if both spouses are recipients, complete a separate form for each spouse)

134

Recipient’s social security number

Before you begin: See Definitions and Special Rules that begin on page 2.

Do not complete this form if you can be claimed as a dependent on someone else’s 2007 tax return.
CAUTION

Part I
1

Complete This Part To See if You Are Eligible To Take This Credit

Check the boxes below for each month in 2007 that all of the following statements were true on the first day of that month.
● You were an eligible trade adjustment assistance (TAA) recipient, alternative TAA recipient, or Pension Benefit Guaranty
Corporation (PBGC) pension recipient.
● You were covered by a qualified health insurance plan for which you paid the premiums directly to your health plan.
● You were not entitled to Medicare Part A or enrolled in Medicare Part B.

● You were not enrolled in Medicaid or State Children’s Health Insurance Program (SCHIP).

● You were not enrolled in the Federal Employees Health Benefits Program or eligible to receive benefits under the U.S.
military health system (TRICARE).
● You were not imprisoned under federal, state, or local authority.
● You were not covered by, or eligible for coverage under, any employer-sponsored health insurance plan (including any
employer-sponsored health insurance plan of your spouse) (see the instructions for line 1 on page 3).

Part II
2

January

February

March

April

May

June

July

August

September

October

November

December

Health Coverage Tax Credit

Amount paid for qualified health insurance coverage for all months checked on line 1 (see
instructions on page 3). Do not include on line 2 any qualified health insurance premiums
paid to “U.S. Treasury–HCTC.” Also, do not include any advance payments from Form 1099-H,
box 1

CAUTION

3

2

You must attach the required documents listed on page
4 for any amounts included on line 2. If you do not attach
the required documents, your credit will be disallowed.

Enter the total amount of any (a) Archer MSA and health savings account distributions used
to pay for qualified health insurance coverage for all months checked on line 1 and (b) National
Emergency Grants you received for health insurance in 2007

3

4

Subtract line 3 from line 2. If zero or less, stop; you cannot take the credit

4

5

Health coverage tax credit. Multiply line 4 by 65% (.65). Enter the result here and on Form
1040, line 70 (check box c); Form 1040NR, line 64 (check box c); Form 1040-SS, line 9; or
Form 1040-PR, line 9

5

For Paperwork Reduction Act Notice, see page 4.

Cat. No. 34641D

Form

8885

(2007)

1
I.R.S. SPECIFICATIONS
TO BE REMOVED BEFORE PRINTING
INSTRUCTIONS TO PRINTERS
FORM 8885, PAGE 2 of 4
MARGINS: TOP 13mm (1⁄ 2 "), CENTER SIDES.
PRINTS: HEAD to HEAD
PAPER: WHITE, WRITING, SUB. 20
INK: BLACK
FLAT SIZE: 432mm (17") x 279mm (11") FOLD TO: 219mm (81⁄ 2 ") x 279mm (11")
PERFORATE: ON THE FOLD
DO NOT PRINT — DO NOT PRINT — DO NOT PRINT — DO NOT PRINT

Form 8885 (2007)

General Instructions

Page

Use Form 8885 to figure the amount, if any, of your health
coverage tax credit (HCTC).

Who Can Take This Credit

You can take this credit only if (a) you were an eligible trade
adjustment assistance (TAA) recipient, alternative TAA
recipient, or Pension Benefit Guaranty Corporation (PBGC)
pension recipient in 2007, (b) you cannot be claimed as a
dependent on someone else’s 2007 tax return, and (c) you
met all of the other conditions listed on line 1. If you cannot be
claimed as a dependent on someone else’s 2007 tax return,
complete Form 8885, Part I, to see if you are eligible to take
this credit.

Definitions and Special Rules
TAA Recipient

2. Coverage under individual health insurance if you were
covered under individual health insurance during the entire
30-day period ending on the date you were separated from
your job that qualified you for TAA, alternative TAA, or PBGC
pension benefits. Individual health insurance does not include
any insurance connected with a group health plan or federalor state-based health insurance coverage.
3. Coverage under a COBRA continuation provision (as
defined in section 9832(d)(1)).

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Section references are to the Internal Revenue Code unless
otherwise noted.

Purpose of Form

2

You were an eligible TAA recipient on the first day of the
month if, for any day in that month or the prior month, you:
● Received a trade readjustment allowance, or

● Would have been entitled to receive such an allowance
except that you had not exhausted all rights to any
unemployment insurance (except additional compensation
that is funded by a state and is not reimbursed from any
federal funds) to which you were entitled (or would be entitled
if you applied).
Example. You received a trade readjustment allowance for
January 2007. You were an eligible TAA recipient on the first
day of January and February.

Alternative TAA Recipient
You were an eligible alternative TAA recipient on the first day
of the month if, for that month or the prior month, you received
benefits under an alternative trade adjustment assistance
program for older workers established by the Department of
Labor.
Example. You received benefits under an alternative trade
adjustment assistance program for older workers for October
2007. The program was established by the Department of
Labor. You were an eligible alternative TAA recipient on the
first day of October and November.

PBGC Pension Recipient
You were an eligible PBGC pension recipient on the first day
of the month, if both of the following apply.
1. You were age 55 or older on the first day of the month.
2. You received a benefit for that month that was paid by
the PBGC under title IV of the Employee Retirement Income
Security Act of 1974 (ERISA).
If you received a lump-sum payment from the PBGC after
August 5, 2002, you meet item (2) above for any month that
you would have received a PBGC benefit if you had not
received the lump-sum payment.

Qualified Health Insurance Plan
A qualified health insurance plan is any of the following.
1. Coverage under a group health plan available through the
employment of your spouse. But see the instructions for line 1
on page 3.

4. State-based continuation coverage provided by the state
under a state law that requires such coverage.
5. Coverage offered through a qualified state high risk pool
(as defined in section 2744(c)(2) of the Public Health Service
Act).
6. Coverage under a health insurance program offered for
state employees.
7. Coverage under a state-based health insurance program
that is comparable to the health insurance program offered for
state employees.
8. Coverage through an arrangement entered into by a state
and (a) a group health plan (including such a plan which is a
multiemployer plan as defined in section 3(37) of ERISA), (b)
an issuer of health insurance coverage, (c) an administrator, or
(d) an employer.
9. Coverage offered through a state arrangement with a
private sector health care coverage purchasing pool.
10. Coverage under a state-operated health plan that does
not receive any federal financial participation.
Exception. A qualified health insurance plan does not include
any of the following.
● Any state-based coverage listed in (4) through (10) above
unless it also meets the requirements of section 35(e)(2).
● A flexible spending or similar arrangement.
● Any insurance if substantially all of its coverage is of
excepted benefits described in section 9832(c). For example,
if you purchase dental or vision benefits separately, these
benefits are not part of a qualified health insurance plan for
the HCTC. But, if you purchase dental or vision benefits as
part of a comprehensive package and these benefits do not
represent substantially all of its coverage, these benefits may
be part of a qualified health insurance plan and the premiums
paid may be eligible for the HCTC.

TIP

If you are not sure whether your health insurance
plan is a qualified health insurance plan, go to
www.irs.gov and enter “HCTC” in the search box.

Qualifying Family Member
A qualifying family member is:
● Your spouse (but see Married Persons Filing Separate
Returns on page 3), or
● Anyone whom you can claim as a dependent (but see the
exception for Children of Divorced or Separated Parents on
page 3).
For any month that you are eligible to claim the HCTC, you
can include premiums paid for a qualifying family member for
that month if all of the following statements were true as of the
first day of that month.

1
I.R.S. SPECIFICATIONS
TO BE REMOVED BEFORE PRINTING
INSTRUCTIONS TO PRINTERS
FORM 8885, PAGE 3 of 4
MARGINS: TOP 13mm (1⁄ 2 "), CENTER SIDES.
PRINTS: HEAD to HEAD
PAPER: WHITE, WRITING, SUB. 20
INK: BLACK
FLAT SIZE: 432mm (17") x 279mm (11") FOLD TO: 219mm (81⁄ 2 ") x 279mm (11")
PERFORATE: ON THE FOLD
DO NOT PRINT — DO NOT PRINT — DO NOT PRINT — DO NOT PRINT

Form 8885 (2007)

Page

● The qualifying family member was covered by a qualified
health insurance plan (see page 2) for which you paid the
premiums. You and your qualifying family member do not
have to be covered by the same plan.
● The qualifying family member was not entitled to Medicare
Part A or enrolled in Medicare Part B.
● The qualifying family member was not enrolled in Medicaid
or State Children’s Health Insurance Program (SCHIP).
● The qualifying family member was not enrolled in the
Federal Employees Health Benefits Program or eligible to
receive benefits under the U.S. military health system
(TRICARE).
● The qualifying family member was not covered by, or
eligible for coverage under, any employer-sponsored health
insurance plan (see the instructions for line 1 on this page).
Married Persons Filing Separate Returns

under (3), (4), or (8) in the definition of Qualified Health
Insurance Plan on page 2) where the employer would have
paid 50% or more of the cost of the coverage.
b. You were covered under any qualified health insurance
plan (including any employer-sponsored health insurance plan
of your spouse) (other than the plans listed under (3), (4), or (8)
in the definition of Qualified Health Insurance Plan on page 2)
and the employer paid any part of the cost of the coverage.

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Your spouse is not treated as a qualifying family member if
your filing status is married filing separately and either (1) or
(2) below applies.
1. Your spouse also was an eligible TAA recipient,
alternative TAA recipient, or PBGC pension recipient in 2007.
2. All of the following apply:

3

a. You lived apart from your spouse during the last 6
months of 2007.

b. A qualifying family member (other than your spouse)
lived in your home for more than half of 2007.
c. You provided over half of the cost of keeping up your
home.
Children of Divorced or Separated Parents
Even if you cannot claim your child as a dependent, he or
she is treated as your qualifying family member for the HCTC
if both of the following apply.
● You were the child’s custodial parent (the parent with
whom the child lived for the greater part of 2007).
● The child’s other parent can claim the child as a dependent
under the rules for children of divorced or separated parents
(see the instructions for Form 1040, line 6c, or Pub. 501,
Exemptions, Standard Deduction, and Filing Information, for
details).
If both of the above apply, the child’s other parent cannot
treat the child as a qualifying family member for the HCTC.
The child must also meet all of the other
conditions of a qualifying family member that
begin on page 2.
CAUTION

Specific Instructions
Line 1
Employer-sponsored health insurance plan. You cannot
claim the HCTC for any month that, on the first day of the
month, either (1) or (2) below apply.
1. You were covered under any employer-sponsored health
insurance plan (including any employer-sponsored health
insurance plan of your spouse) (except insurance substantially
all of the coverage of which is of excepted benefits described
in section 9832(c)) and the employer paid 50% or more of the
cost of the coverage.
2. You were an alternative TAA recipient and either of the
following applies.
a. You were eligible for coverage under any qualified health
insurance plan (including any employer-sponsored health
insurance plan of your spouse) (other than the plans listed

CAUTION

Any amounts contributed to the cost of coverage by
you or your spouse on a pre-tax basis are
considered to have been paid by the employer.

Check the boxes on line 1 for each month that, on the first
day of the month, neither (1) nor (2) above applies and you
met all of the other conditions listed on line 1.
Example 1. On October 1, 2007, your only health insurance
coverage was under an employer-sponsored health insurance
plan. The plan is not one in which substantially all of the
coverage is of excepted benefits described in section 9832(c).
The employer paid 40% of the cost of the coverage. You paid
20% of the cost of the coverage through pre-tax
contributions. You cannot claim the HCTC for the month of
October because the employer is considered to have paid
60% of the cost of the coverage.
Example 2. Assume the same facts as in Example 1 except
that the employer paid only 25% of the cost of the coverage.
The employer is considered to have paid 45% of the cost of
the coverage (25% that was paid by the employer plus 20%
that you paid through pre-tax contributions). If you were an
eligible TAA recipient or PBGC pension recipient, you can
claim the HCTC for the month of October if you met all the
other conditions listed on line 1 on October 1, 2007. If you
were an alternative TAA recipient, you can claim the HCTC for
the month of October only if, on October 1, 2007, all of the
following apply.
● You were not eligible for coverage under any qualified
health insurance plan (including any employer-sponsored
health insurance plan of your spouse) (other than the plans
listed under (3), (4), or (8) in the definition of Qualified Health
Insurance Plan on page 2) where the employer would have
paid 50% or more of the cost of the coverage.
● The plan was a type of plan listed under (3), (4), or (8) in
the definition of Qualified Health Insurance Plan on
page 2.
● You met all of the other conditions listed on line 1.

Line 2
If your qualified health insurance plan covers
anyone other than you and your qualifying family
members, see Pub. 502, Medical and Dental
CAUTION Expenses (Including the Health Coverage Tax
Credit), before completing line 2.
Enter the total amount of insurance premiums paid for
coverage for you and all qualifying family members under a
qualified health insurance plan (as defined on page 2) for all
months checked on line 1. But do not include any qualified
health insurance premiums you paid to “U. S.
Treasury–HCTC” or any advance payments shown on Form
1099-H, box 1.
Example 1. You checked January on line 1. You paid $225
($200 for basic coverage and $25 for dental benefits which
are purchased separately) to your insurance company for
coverage in January. The $25 you paid for dental benefits is
ineligible for the HCTC. You would include the $200 you paid
for your basic insurance on line 2.

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I.R.S. SPECIFICATIONS
TO BE REMOVED BEFORE PRINTING
INSTRUCTIONS TO PRINTERS
FORM 8885, PAGE 4 of 4
MARGINS: TOP 13mm (1⁄ 2 "), CENTER SIDES.
PRINTS: HEAD to HEAD
PAPER: WHITE, WRITING, SUB. 20
INK: BLACK
FLAT SIZE: 432mm (17") x 279mm (11") FOLD TO: 219mm (81⁄ 2 ") x 279mm (11")
PERFORATE: ON THE FOLD
DO NOT PRINT — DO NOT PRINT — DO NOT PRINT — DO NOT PRINT

Form 8885 (2007)

Page

Example 2. You checked January on line 1. Your
insurance coverage for January cost $225 ($200 for basic
coverage and $25 for dental benefits ineligible for the HCTC).
You paid $95 to “U.S. Treasury–HCTC” for January. The $95
equals $70 (your 35% share of the $200 eligible premium)
plus the $25 for dental benefits ineligible for the HCTC. You
received a Form 1099-H showing an advance payment of
$130 (65% of the $200 eligible premium) for January. You
would include nothing for January on line 2.
Required documents. You must attach to your tax return
the required documents listed below.
All health plans. For all health plans you must include
both of the following.
1. A copy of your health insurance bills or COBRA
payment coupons. The bills must have:
a. Your name (or name of the policy holder),
b. The name of your health plan,
c. Your monthly premium amount,
d. Dates of coverage, and
e. Your health plan identification number.
2. Proof of payment such as:
a. Canceled checks (copy of front and back),
b. Bank statements, or
c. Credit card statements.
COBRA coverage. You must include the above
information under All health plans and one of the following
documents.
1. A copy of your completed and signed COBRA Election
Letter. It may also be called a COBRA Enrollment Form,
Application Form, Enrollment Application for Continuing
Coverage, or Election Agreement.
2. A letter from your former employer or COBRA
administrator saying you have COBRA coverage. The letter
must have:
a. The COBRA coverage start and end dates,
b. Name of the health plan,
c. Your home address, and
d. Covered family members, their dates of birth, their
relationship to you, and their social security numbers.
3. A copy of “Notice of Rights to Continue Coverage.”
Non-group (individual) health plans. You must include
the above information under All health plans and both of the
following documents.
● A letter or other document from your former employer or
your unemployment office that shows the date you left
your job.
● A document from your health plan that shows your first
date of coverage. Your first day of coverage in a
non-group (individual) health plan must have been at least
30 days before you left your job.

4

Coverage through your spouse’s employer. You must
include the information under All health plans on this page
and the following documents.
● Copies of paycheck stubs showing the health coverage
deductions for the qualified months.
● A letter or other statement from your spouse’s employer
that states the employer contributed less than 50% of the
cost of the coverage.
E-filed return. If you e-file, you must attach a copy of the
required documents to Form 8453, U.S. Individual Income
Tax Declaration for an IRS e-file Return, or Form 8453-OL,
U.S. Individual Income Tax Declaration for an IRS e-file
Online Return.
Example 1. You are eligible to claim the HCTC for October
and November. You paid $500 of qualified health insurance
premiums in each month for yourself and $250 for your
qualifying family members. The amount on Form 8885, line 2,
is $1,500 ($750 for October and $750 for November). You did
not receive any HCTC advance payments during 2007. You
must attach copies of your health insurance bills and proof of
payment for you and your qualifying family members totaling
$1,500, along with any other required documents. The bills
and proof of payment should be for October and November.
Example 2. The facts are the same as in Example 1 except
that, instead of paying the $750 premium for November, you
paid $262.50 (35% of the $750 November premium) to “U.S.
Treasury–HCTC” and received an advance payment of
$487.50 (65% of the $750 November insurance premium).
Form 1099-H shows the total advance payment of $487.50.
You would include $750 on line 2 for the October payment.
You would not include any part of the November insurance
premium. You must attach a copy of your health insurance
bill and proof of payment totaling $750 for October, along
with any other required documents.

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Paperwork Reduction Act Notice. We ask for the
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