The other part of the eligibility equation was the "qualified health plan." If you met the first set of requirements, you could receive the HCTC only if you had one of these types of health plans:
- COBRA insurance offered through a former employer
- A state-qualified health plan that met the Trade Act of 2002's consumer protection requirements
- Certain plans offered through a Voluntary Employees' Beneficiary Association (VEBA), which are set up by financially distressed companies to provide benefits. VEBAs are usually created because of a class-action lawsuit, collective bargaining agreement or bankruptcy settlement.
- Spousal coverage through any one of these types of plans
For COBRA and certain other employer-sponsored plans, you had to be responsible for 50 percent or more of your monthly premium to qualify for the tax credit. And your portion of the premium had to be paid in after-tax dollars -- if your insurance premiums came out of your pre-tax paycheck, for example, you couldn't also get the tax credit. That would be a double benefit, which the IRS obviously does not advocate.
Starting in August 2003 (a year after the act passed), you could choose to take your HCTC on a yearly or monthly basis. If you picked yearly, you'd have to file federal Form 8885 with your taxes and wait for a refund check or for the credit to be applied to your tax bill. Monthly recipients would fill out Form 1099-H and the HCTC program would send 72.5 percent of the premium directly to the insurer every month.
The Affordable Care Act introduced strictly income-based tax credits in 2014, so the Health Care Tax Program became obsolete. To find out more about the Affordable Care Act and taxes in general, check out the links on the next page.