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Health Benefit Plan Credit (code 23)

 UC §59-10-1023

General Information

You may claim a credit of 5 percent 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 percent of the premiums are paid by you or your spouse, and are not subsidized or funded by the current 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.

Note: Amounts itemized or otherwise deducted in determining federal taxable income, or used to claim a federal credit, cannot be used for this Utah credit.

Excluded Amounts

The credit is 5 percent of amounts paid for health benefit plans (but not self-insurance) after deducting:

  1. amounts used to calculate a credit for health insurance costs of eligible persons (IRC Section 35);
  2. income exclusions for employer-provided coverage under an accident or health plan (IRC Section 106);
  3. cafeteria or employer plans covering all employees who may choose among two or more cash and qualified benefits (IRC Section 125);
  4. trade or business expenses for self-employed persons up to 100 percent of premiums paid, but not more than your net business income (IRC Section 162);
  5. medical and dental expenses deducted on federal Schedule A (IRC Section 213); and
  6. all policies that are not part of your health benefit plan, such as dental, vision, supplemental health or Medicare supplemental policies.

Maximum Amount

The maximum credit is:

  1. $300 for a single taxpayer (including married filing separately, head of household, and qualifying widow(er)) with no dependents;
  2. $600 for a married couple filing jointly with no dependents; and
  3. $900 for all taxpayers (any filing status) with dependents insured under the health benefit plan.

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, also commonly known as Obamacare) if:

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

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

You must adjust your Utah credit for health insurance underpayments or credits on your previous year’s federal return. See line 2 and line 4 of the worksheet below.

Calculation of Health Benefit Plan Credit

Credit Calculation
1. Amount paid for health benefit plan in 2018 $

2*. Enter any excess advance premium tax repayment from your 2017 federal form:

  • 1040, line 46
  • 1040NR, line 44
  • 1040A, line 29
$*
3. Add line 1 and line 2 $

4*. Enter your net premium tax credit from your 2017 federal form:

  • 1040, line 69
  • 1040NR, line 65
  • 1040A, line 45
$*
5. Subtract line 4 from line 3 $
6. Excluded amount (see instructions, above) $
7. Subtract line 6 from line 5 (if less than zero, enter “0”) $
8. Multiply line 7 by 5% (.05)  

9. Enter maximum credit allowed per return:

  • $300 for single taxpayer with no dependents
  • $600 for married filing jointly with no dependents
  • $900 for all taxpayers with dependents
$
10. Enter the lesser of line 8 or line 9. This is your credit. $

Enter the credit amount from line 10 above on your Utah TC-40A, Part 3, using code 23.

* Enter an amount on line 2 or line 4 only if you claimed the Health Benefit Tax Credit on your 2017 Utah return.

Any credit that is more than the tax liability may not be carried back or 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.