SEC. 4. REFUNDABLE CREDIT FOR HEALTH INSURANCE 
COVERAGE 
UNDER 
HIGH 
DEDUCTIBLE 
HEALTH PLAN. 
(a) ALLOWANCE OF CREDIT.—Subpart C of part IV 
of subchapter A of chapter 1 of the Internal Revenue Code 
of 1986 (as amended by this Act) is amended by inserting 
after section 36 the following new section: 
‘‘SEC. 36A. HEALTH INSURANCE COVERAGE UNDER HIGH 
DEDUCTIBLE HEALTH PLAN. 
‘‘(a) ALLOWANCE OF CREDIT.—In the case of an in-
dividual, there shall be allowed as a credit against the tax 
imposed by this subtitle for the taxable year the aggregate 
amount paid in cash by the taxpayer for qualified coverage 
under a high deductible health plan for the taxpayer and 
the taxpayer’s spouse and dependents. 
‘‘(b) LIMITATIONS.— 
‘‘(1) IN GENERAL.—The amount allowable as a 
credit under subsection (a) for the taxable year shall 
not exceed the sum of the monthly limitations for 
months during such taxable year that the taxpayer 
or the taxpayer’s spouse or dependents is an eligible 
individual. 
‘‘(2) MONTHLY LIMITATION.— 
‘‘(A) IN GENERAL.—The monthly limita-
tion for any month is the credit percentage of 
1⁄12 of— 
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‘‘(i) $1,111 in the case of qualified 
health insurance covering only 1 adult or 1 
or more children, 
‘‘(ii) $2,222 in the case of qualified 
health insurance covering only 2 adults or 
1 adult and 1 or more children, and 
‘‘(iii) $3,333 in the case of qualified 
health insurance covering at least 2 adults 
and 1 or more children or at least 3 
adults. 
‘‘(B) SPECIAL RULE FOR MARRIED INDI-
VIDUALS.—In the case of a taxpayer who is 
married (within the meaning of section 7703) 
as of the close of the taxable year but does not 
file a joint return for such year and who does 
not live apart from such taxpayer’s spouse at 
all times during the taxable year, any dollar 
limitation imposed under subparagraph (A) 
shall be divided equally between the taxpayer 
and the taxpayer’s spouse unless they agree on 
a different division. 
‘‘(3) CREDIT PERCENTAGE.—For purposes of 
paragraph (2), the credit percentage is 90 percent, 
reduced as provided in paragraphs (4) and (5). 
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‘‘(4) PHASEOUT OF CREDIT PERCENTAGE FOR 
COVERAGE OF 1 ADULT OR CHILDREN.— 
‘‘(A) JOINT RETURN, SURVIVING SPOUSES, 
AND HEADS OF HOUSEHOLD.—If— 
‘‘(i) coverage described in paragraph 
(2)(A)(i) is provided under qualified health 
insurance for any month in the taxable 
year, and 
‘‘(ii) taxpayer is a married individual, 
surviving spouse (as defined in section 
2(a)), or head of household (as defined in 
section 2(b)) and has modified adjusted 
gross income in excess of $25,000 for the 
taxable year, 
the 90 percent in paragraph (3) shall be re-
duced by the number of percentage points 
which bears the same ratio to 90 percentage 
points as such excess bears to $15,000. 
‘‘(B) SPECIAL RULE FOR MARRIED FILING 
SEPARATE RETURN.—In the case of a married 
individual who has coverage described in para-
graph (2)(A)(i) for any month in the taxable 
year and who files a separate return for the 
taxable year, subparagraph (A) shall be applied 
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by substituting for each dollar amount therein 
one-half of such dollar amount. 
‘‘(C) SINGLE RETURN.—In the case of any 
other return by an individual who has coverage 
described in paragraph (2)(A)(i) for any month 
in the taxable year, and if— 
‘‘(i) the taxpayer has modified ad-
justed gross income in excess of $15,000 
for the taxable year but not in excess of 
$20,000, the 90 percent in paragraph (3) 
shall be reduced by the number of percent-
age points which bears the same ratio to 
40 percentage points as— 
‘‘(I) the excess of modified ad-
justed gross income in excess of 
$15,000, bears to 
‘‘(II) $5,000, or 
‘‘(ii) the taxpayer has modified ad-
justed gross income in excess of $20,000 
for the taxable year, the 90 percent in 
paragraph (3) shall be reduced by the sum 
of 40 percentage points plus the number of 
percentage points which bears the same 
ratio to 50 percentage points as— 
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‘‘(I) the excess of modified ad-
justed gross income in excess of 
$20,000, bears to 
‘‘(II) $10,000. 
‘‘(5) PHASEOUT OF CREDIT PERCENTAGE FOR 
COVERAGE
OF
OR
MORE
ADULTS
AND
CHIL-
DREN.— 
‘‘(A) IN GENERAL.—If— 
‘‘(i) coverage described in clause (ii) 
or (iii) of paragraph (2)(A) is provided 
under qualified health insurance for any 
month in the taxable year, and 
‘‘(ii) the taxpayer has modified ad-
justed gross income in excess of $25,000 
for the taxable year, 
the 90 percent in paragraph (3) shall be re-
duced by the number of percentage points 
which bears the same ratio to 90 percentage 
points as such excess bears to $35,000. 
‘‘(B) SPECIAL RULE FOR MARRIED FILING 
SEPARATE RETURN.—In the case of a married 
individual filing a separate return, subpara-
graph (A) shall be applied by substituting for 
each dollar amount therein one-half of such dol-
lar amount. 
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‘‘(6) ROUNDING.—Any percentage resulting 
from a reduction under paragraphs (4) and (5) shall 
be rounded to the nearest one-tenth of a percent. 
‘‘(7) MODIFIED
ADJUSTED
GROSS
INCOME.— 
For purposes of this subsection, the term ‘modified 
adjusted gross income’ means adjusted gross income 
determined— 
‘‘(A) without regard to this section and 
sections 911, 931, and 933, and 
‘‘(B) after application of sections 86, 135, 
137, 219, 221, and 469. 
‘‘(8) ADULT.—For purposes of this subsection, 
the term ‘adult’ means an individual who is the tax-
payer, the taxpayer’s spouse, or a dependent of the 
taxpayer who has attained age 24 as of the close of 
the taxable year. 
‘‘(9) CHILD.—For purposes of this subsection, 
the term ‘child’ means a dependent of the taxpayer 
who has not attained age 24 as of the close of the 
taxable year. 
‘‘(c) QUALIFIED COVERAGE UNDER
A HIGH DE-
DUCTIBLE HEALTH PLAN.—For purposes of this section, 
the term ‘qualified coverage under a high deductible health 
plan’ means coverage under a high deductible health plan 
(as defined in section 223(c)(2)) for any month for which 
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each individual covered under such plan is an eligible indi-
vidual. 
‘‘(d) ELIGIBLE INDIVIDUAL.—For purposes of this 
section— 
‘‘(1) IN
GENERAL.—The term ‘eligible indi-
vidual’ means, with respect to any month, an indi-
vidual who— 
‘‘(A) is described in section 223(c)(1) and 
is not covered by a group health plan, and 
‘‘(B) does not have other specified cov-
erage. 
‘‘(2) GROUP HEALTH PLAN.—The term ‘group 
health plan’ has the meaning given such term by 
section 5000 without regard to subsection (d) there-
of. For purposes of the preceding sentence, an ar-
rangement which constitutes individual health insur-
ance shall not be treated as a group health plan if 
such arrangement is a high deductible health plan 
(as defined in section 223(c)(2)), or is a payment by 
an employer or employee organization with respect 
to such high deductible health plan, notwithstanding 
that an employer or employee organization nego-
tiates the cost or benefits of such arrangement. 
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