Health Insurance Credit§
Definition: The Health Insurance Credit is a component of the Earned Income Credit (EIC) that provides tax relief for taxpayers who pay health insurance premiums for one or more qualifying children. This credit aims to alleviate the financial burden of health insurance costs for low- to moderate-income working individuals or families.
Examples§
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Single Parent with One Child: A single parent earning $30,000 annually could qualify for the Earned Income Credit, including the Health Insurance Credit, if they pay health insurance premiums for their child.
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Married Couple with Two Children: A married couple with a combined income of $40,000 and paying health insurance premiums for their two children may also be eligible for this credit.
Frequently Asked Questions (FAQs)§
Q1: Who qualifies for the Health Insurance Credit? A1: Taxpayers who are eligible for the Earned Income Credit and who pay health insurance premiums for one or more qualifying children may qualify for the Health Insurance Credit.
Q2: How much can I claim with the Health Insurance Credit? A2: The amount varies depending on the taxpayer’s income and the number of qualifying children covered under the health insurance plan.
Q3: Are there any specific health insurance plans that qualify for this credit? A3: Generally, any plan that provides health coverage for qualifying children could be eligible, but it’s important to review specific IRS guidelines or consult a tax advisor.
Q4: Can this credit be claimed by non-custodial parents? A4: Only if the non-custodial parent has an agreement as part of a court or administrative order to pay for the child’s health insurance may they be able to claim the credit.
Q5: Does this credit affect other tax benefits? A5: It could potentially reduce the taxpayer’s overall tax due, thus positively affecting the amount of other refundable or nonrefundable credits they may receive.
Related Terms with Definitions§
- Earned Income Credit (EIC): A refundable tax credit aimed at low- to moderate-income working individuals and families, primarily those with children.
- Qualifying Child: A dependent who meets specific criteria defined by the IRS, such as relationship, age, residency, and income limits.
- Health Insurance Premiums: The monthly fee paid to have health insurance coverage.
- Refundable Tax Credit: A type of tax credit that can reduce the amount of tax owed to zero and provide a refund to the taxpayer.
- Dependent: A person, typically a child or relative, whom the taxpayer supports financially and claims on their tax return.
Online References to Online Resources§
- IRS - Earned Income Tax Credit (EITC)
- HealthCare.gov
- IRS Publication 596 - Earned Income Credit
Suggested Books for Further Studies§
- “J.K. Lasser’s Your Income Tax Professional Edition 2023” by J.K. Lasser
- “Individual Taxation: An Active Learning Approach” by Sally M. Jones and Shelley C. Rhoades-Catanach
- “The Tax and Legal Playbook: Game-Changing Solutions to Your Small Business Questions” by Mark J. Kohler
Fundamentals of Health Insurance Credit: Taxation Basics Quiz§
Thank you for exploring this overview of the Health Insurance Credit and testing your knowledge with our quiz! Keep honing your expertise in the realm of taxation.
