Health Benefit Plan Premiums

 UC §59-10-1023 and Rule R865-9I-52

Do You Qualify?

Utah taxpayers may claim a non-refundable credit for certain health insurance premiums paid during the taxable year. However, there are many restrictions. Answer the following questions to determine if you qualify for the Health Benefit Plan 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.
    2. If the answer is Yes, review the following information, examples and common errors, then complete the health benefit plan premium calculator below.

What Premiums Qualify for the Credit?

You may claim a credit of 5% of the amount paid for a health benefit plan only if you, or your spouse on a joint return, are not insured under a health benefit plan maintained and funded in whole or in part by your employer or another person’s employer.

You cannot claim this credit if you choose not to participate in a plan maintained and funded by a current or former employer. You also cannot use pre-tax deductions from wages through employer-sponsored programs, such as a cafeteria or flex plan, to claim the credit.

Payments to COBRA health plans qualify for this credit if 100% of the premiums are paid by you or your spouse, and are not subsidized or funded by the curent or former employer or another person's employer. You cannot claim COBRA payments if you choose not to participate in a plan maintained and funded by a current or former employer.

The following do not qualify for the credit:

  • Payments made for doctor visits, hospitals or health care facilities, or nursing care;
  • Accidental death and dismemberment, and long-term care insurance premiums;
  • Separate dental and optical/vision insurance premiums;
  • Medicare supplemental insurance premiums;
  • Insurance premiums paid for a specific disease (e.g., cancer);
  • A policy or certificate that is offered and marketed as supplemental insurance; or
  • Self-insurance.

The credit only applies to health benefit plan premiums paid.

Patient Protection and Affordable Care Act

You may qualify for this credit if you purchase health insurance through an exchange established under the Patient Protection and Affordable Care Act (PPACA) if:

  1. The plan purchased on the exchange meets the requirements listed above, and
  2. You were not eligible to participate in an employer-sponsored plan.

You may only take the credit for amounts you actually paid for a plan through an exchange.

Note: For tax year 2015 (that you will file in 2016), you must subtract any federal credit you claimed on the 2014 federal return for this insurance from amounts you paid in 2015 for this insurance.

Calculating the Credit

If you qualify to claim the health care benefit credit, use the worksheet below to determine the amount of your credit.

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

  • Premiums paid for a health benefit plan if you claim a tax credit under IRC §35 for that amount on your federal return;
  • Income excluded from your federal gross income under IRC §106 for employer-provided coverage under an accident or health plan;
  • Premiums paid through cafeteria plans under IRC §125 offered by an employer that covers all employees where you choose among two or more benefits consisting of cash and qualified benefits;
  • Premiums deducted as trade or business expenses for self-employed individuals;
  • Supplemental health insurance premiums, including Medicare supplemental policy premiums;
  • Medical, dental, etc. expenses you deducted under IRC Section 213 on your federal Schedule A; and
  • All dental or vision insurance policy premiums you paid if the insurance is not a part of your health benefit plan.

The maximum credit that may be claimed is:

  • $300 for a single taxpayer (including married filing separately, head of household, and qualifying widow(er) with no dependents),
  • $600 for a married couple filing jointly with no dependents, or
  • $900 for all taxpayers (any filing status) with dependents.
Health Benefit Plan Credit Calculation
1. Amount paid for health benefit plan $
2. Excluded amount (see instructions above) $
3. Subtract line 2 from line 1 $
4. Credit percentage - 5% .05
5. Multiply line 3 by line 4 $

6. Enter maximum credit allowed:

  • $300 for a single taxpayer with no dependents,
  • $600 for married filing jointly with no dependents, or
  • $900 for all taxpayers with dependents
$
7. Credit - lesser of line 5 or line 6 $

Enter the credit amount from line 7 above on your Utah TC-40A, Part 3, using code 23.

Any credit in excess of the tax due will not be refunded, and may not be carried back or carried forward.

There is no form for this credit. Keep all related documents with your tax records.

Examples

The examples below will help you determine if you qualify for claiming the health benefit plan credit. The examples are representative of the most common situations. However, they may not cover your specific situation. If you need additional assistance, contact a technical research agent at 801-297-7705 or 1-800-662-4335 ext. 7705 if outside the Salt Lake area.

Example 1: Retired Federal Employee

John is a federal employee who retired at the 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.

The amount John pays for his portion of the OPM (former employer) health insurance premiums and the additional health policy premiums do not qualify for this credit.

Example 2: Retired State Employee

Henry 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 are 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.

The premiums they paid for the supplemental coverage do not qualify for this credit.

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 for credit purposes.

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. (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 his federal form 1040.

No health benefit plan premiums may be considered for the Utah 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 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% and Terri pays the other 20% of the premium cost. 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 Part B or Part D, or the 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 Parts A and B. The Medicare Part B premiums are deducted from their social security benefits. They also pay premiums for a Medicare Part B supplemental insurance policy and a separate Medicare Part D prescription drug plan.

They can treat the full amount of premiums paid for their Medicare Part B and Part D plans as qualified premiums for the credit. However, their Medicare Part B supplemental premiums do not qualify for the 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, as well as by Medicare. Their Medicare plan becomes a secondary payer. In addition they purchased a cancer policy.

They cannot use any of the premiums they paid for their former employer's plan or their Medicare Part A and Part B premiums for the credit. 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 when computing 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.