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Revised April 15, 2010

Health Benefit Plan Premiums (Code 23)

This credit and worksheet applies to Utah individual income tax returns beginning with the 2009 tax year. This credit was not available for the 2008 tax year. If filing a return for 2007 and earlier click here.

Health Benefit Plan Premiums Non-refundable Credit Worksheet – Do You Qualify?

Answer the following questions to determine if you qualify for the Health Benefit Plan non-refundable credit.

  1. Are you or your spouse eligible to participate in a health benefit plan in which a current or former employer pays any portion of the health plan premiums, even if you elect not to participate in the plan?
    1. If the answer is Yes, STOP you do not qualify for the credit.
    2. If the answer is Yes and the employer's plan only covers employees and does not allow the employee to purchase coverage through the company plan for his/her family members, go to question 2.
    3. If the answer is No, go to question 2.
  2. Do you have a health benefit plan that covers you and/or your family? (This includes a policy for members of your family that are not eligible to participate in a current or former employer's plan).
    1. If the answer is No, STOP you do not qualify for the credit.
  3. If the answer is Yes, Review the following information, examples and common errors, then complete the health benefit plan premium calculator below.

Additional Information

The additional examples and explanations below will help you determine if you qualify for claiming the health benefit plan premium non-refundable credit. The examples are representative of the most common situations. Consequently, they may not cover your specific situation. If you are not sure if you qualify, you may contact a technical research agent at:

801-297-7705
1-800- 662-4335 ext 7705 if you are outside the Salt Lake area.

Common errors made by taxpayers who claim the Health Insurance Premium Non-refundable Credit

Tip

The credit only applies to health benefit plan premiums.

Examples

Example 1: Retired Federal Employee

John is a federal employee who retired at age of 60. The Office of Personnel Management (OPM) continues to fund /subsidize a portion of the retiree's health insurance. His health worsened and he had to purchase an additional health insurance policy at a cost of $300 a month to help offset his deductibles and medications.

John cannot claim his portion of the OPM (former employer) health insurance premiums or the additional health policy premiums.

Example 2: Retired State Employee

James retired from the State of Utah at the age of 62 due to his poor health. His spouse is age 63 and still works. The retiree had enough sick-leave to continue the state medical benefits for himself and his spouse until they reach age 65, when they will be eligible for Medicare coverage. The spouse's employer does not offer health care benefits. They pay an additional $250 a month for a supplemental health care insurance policy to cover deductibles and co-payments not covered by the state's plan.

They cannot use the premiums they paid for the supplemental coverage.

Example 3: Retired Individual Participates in Former Employer's Insurance Program

Karen retired at age 62. The former employer provides a limited health program for retirees and she got a separate supplemental health insurance policy. Karen cannot claim either the supplemental insurance or the former employer limited insurance premiums paid.

Example 4: Self-employed Individual

Ken is self-employed and paid health benefit plan premiums for himself. His spouse works and is covered under her employer's health plan. Her employer's plan only provides coverage for her. Caution: This will rarely happen because most health plans allow an employee to pay an additional portion of the premium for a spouse and dependents.

Ken paid $5,400 in health benefit plan premiums for the year. He claims 100% of his health benefit plan premiums as self-employed health insurance deduction on line 29 of his federal 1040 form.

There are no remaining health benefit plan premiums to be considered for the Utah health benefit plan non-refundable credit.

Example 5: Company Plan Covers Spouse and Children, but Employee Elects not to Participate

Ruth is eligible to participate in an employer-funded health benefit plan. The plan provides coverage for her family, but only if she pays an additional premium. Ruth chooses not to cover her family under the plan. Instead she buys a separate, less expensive plan for her spouse and children.

Since her spouse and children were eligible and could have been included in the employer plan, a credit for any premiums paid is not allowed.

Example 6: Retired Taxpayer and Family Covered under Former Employer's Plan

Janice is retired and eligible to participate in a health benefit plan funded and maintained by the employer from which she retired. The plan provides coverage for her family, but only if she pays an additional premium.

Janice may not use the premiums she paid for the employer's health plan to compute the Utah credit.

Example 7: Taxpayer age 65, is Retired and Spouse Still Works

Mel is 65, is on Medicare and pays the premiums for Medicare B, a Medicare B supplemental insurance plan and a Medicare D prescriptions drug plan. His spouse, Terri, is 55 and is still working. Terri's employer offers a plan that will cover her and Mel. The employer pays 80 percent of the premium costs and Terri must pay the other 20 percent. They choose to only cover Terri under the company's plan.

Since Mel and Terri are both eligible under the employer plan, they cannot use any of the premiums paid for the company plan, Medicare B or D, or any supplemental plan to compute their Utah credit.

Example 8: Taxpayer and Spouse are 65 and Covered by Medicare

Larry and his spouse, Jeannette, are both 65 and covered by Medicare A and B. The Medicare B premiums are deducted from their social security benefits. They also pay premiums for a Medicare B supplemental insurance policy and a separate Medicare D prescription drug plan.

They can use the full amount of premiums paid for their Medicare B and D plans. However, they cannot use the Medicare B supplemental premiums to compute their Utah credit.

Note: If they claim any portion of the premiums as an itemized deduction on their federal return, their qualifying health insurance premiums for this credit must be reduced by the deduction claimed.

Example 9: Taxpayer and Spouse are 65 and Participate in Prior Employer Health Plan and Have a Cancer Plan

Robert and his spouse, Anne, are both 65 and are covered by a plan offered by their former employer and Medicare. Their Medicare plan becomes a secondary payer. In addition they purchased a cancer plan.

They cannot use any of the premiums they paid for their former employer's plan or their Medicare Part A and B premiums. They also cannot claim the premiums paid for the cancer policy.

Example 10: Taxpayer and Spouse are 65 and Participate in the Medicare Part D Drug Plan

Al and his spouse, Cathy, are both 65 and participate in a Medicare Part D drug plan. They have three options for paying the premiums:

  1. They can give permission to the company offering the plan to automatically deduct their premiums from their bank account, or
  2. They can have the premiums deducted every month from their Social Security benefits, similar to their premiums for Medicare Part B, or
  3. They can pay their premiums by mailing a check or money order each month.

Regardless of the method they choose to pay the premiums, they can use the full amount of premiums paid for their Medicare drug plans to compute their Utah credit.

Note: If they claim any portion of the premiums as an itemized deduction on their federal return, their qualifying health insurance premiums for this credit must be reduced by the deduction claimed.

Health Insurance Premium Deduction Calculator

If you have finished reviewing the above information and qualify to claim the health care insurance premium non-refundable credit, use the Health Care Insurance Premium Credit Calculator below to determine the amount of the qualified health benefit plan premiums to use in the calculation.

The credit is equal to 5% of the amount paid for a health benefit plan (but not self-insurance) less the total of the following excluded amounts:

  1. Amount paid for a health benefit plan if the claimant claims a tax credit for that amount on federal return (IRC Section 35),
  2. Income excluded from the claimants federal gross income for employer-provided coverage under accident or health plan (IRC Section 106),
  3. Cafeteria plans. Generally, this is an employer plan covering all employees who may choose among two or more benefits consisting of cash and qualified benefits (IRC Section 125),
  4. Trade or business expenses. This is the deduction for self-employed individuals of up to 100 percent of health insurance premiums paid, but not exceeding the taxpayer's net business income (IRC Section 162).
  5. Supplemental insurance premiums, including Medicare supplemental policy premiums, and
  6. Medical, dental, etc. expenses. These are itemized expenses deducted on federal Schedule A to the extent they exceed 7.5 % of the taxpayer's federal adjusted gross income (IRC Section 213).

The maximum credit is:

Calculation of Health Benefit Plan Credit

1. Amount paid for health benefit plan $
2. Excluded amount $
3. Subtract line 2 from line 1 $
4. Multiply line 3 by 5% (.05) $

5. Enter maximum credit allowed

  • $300 for single taxpayer with no dependents
  • $600 for married filing jointly with no dependents
  • $900 for all taxpayer with dependents
$
6. Enter the lesser of line 4 or line 5. This is your credit.
Enter the amount on TC-40A, Part 3, using code 23
$

Do not enter more than the maximum credit allowed for your filing status as shown above.

Any credit in excess of the tax liability may not be carried back or forward.