Tax Credit for Job Loss and Medical Insurance
Since 2002, the federal tax rules have allowed some unemployed workers to claim tax credits to help them pay for health insurance. Until February 2011, the credit paid up to 80 percent of your premiums; the reimbursement fell to 65 percent after February 2011. There are qualifying conditions, however, and it’s best to contact the IRS or your tax accountant for full details and guidelines if you think you may qualify.
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Availability
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The Health Coverage Tax Credit is available if you are unemployed and have lost your job through the effects of foreign trade competition. The Department of Labor and the IRS must certify your status, for which your former employer must file a petition. The HCTC is also available for beneficiaries of the Pension Benefit Guaranty Association, a federal agency which assumes payments for some private company pensions that are in default.
Claiming the Credit
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There are two ways to claim the credit. You may take the HCTC when you file you tax return for the previous year, by subtracting it directly from the amount of tax that you owe the IRS. You may also take the credit on an ongoing basis, from month to month, in order to help you pay health-insurance premiums. You document the claim by filing Form 8885 with your annual tax return.
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Enrollment and Payments
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For a monthly credit, you must enroll in the HCTC program with the IRS; your 35 percent contributions to the premium cost are them matched at the remaining 65 percent by the IRS, which pays the premium to the insurance company. You cannot take the credit if you can be claimed as a dependent on someone else's tax return.
Trade Adjustment Allowance Program
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To qualify, the Department of Labor must certify that you have lost your job through trade competition. Your employer files a petition with the agency to apply for the agency’s Trade Adjustment Assistance program. In addition to qualifying you for the HCTC, this program offers job referral and placement services, job training, and other re-employment services. Claimants who qualify as beneficiaries of the Pension Benefit Guaranty Corp. must be at least 55 years of age. You must have health coverage through your spouse's employment, through individual health insurance that was in effect for 30 days prior to the loss of your job, or through COBRA continuation coverage, as long as you paid at least 50 percent of the COBRA premium.
Qualifying Family Members
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At one time, the IRS also allowed certain family members such as a spouse or dependents to also take part in the program, if the HCTC-covered employee had enrolled in Medicare, passed away, or been divorced. As of Feb. 14, 2011, however, these family members no longer qualified under these conditions.
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