How to Save on Childcare Costs: Essential Tips for Working Parents

Childcare costs are sky high in America right now, with some parents claiming their childcare costs more than their mortgage.

So what can you do about it? Maybe more than you think.

Find Out About Your Employer’s Benefits

Find out about all the benefits your employer offers, preferably before you even take the job (and even if you don’t have kids yet, if you plan to at some point). Statutory provision for things like maternity leave in the USA is the worst in the developed world, but that doesn’t mean individual employers don’t provide for families. In fact it’s one way in which businesses can stand out as a good employer and recruit and retain top level staff.

Some employers offer paid maternity, paternity, and parental/family leave. Some offer personal days that can be used for emergency childcare situations. Some employers offer on-site, subsidized childcare. Find out about flexible work options too, such as the ability to work hours that fit around your child’s daycare schedule, or work from home when childcare falls through.

Large institutions, such as hospitals and universities, are more likely to offer on-site childcare than smaller businesses, but smaller companies may be more flexible about you working flexible hours, or bringing your kid to work occasionally when you have childcare issues. Ask your employer if you’re not sure what’s in place, and make sure that both parents are using any childcare benefits their employer provide.

Use a Dependent Care Account if You Can

A Dependent Care Account is a type of flexible spending account (FSA) sometimes referred to as a childcare FSA. It allows parents to put aside up to $5,000 of their pre-tax pay to use for childcare expenses. Usually only one parent can open a Dependent Care Account, but if you are a couple who file separate tax returns you may be able to each put $2,500 aside.

This does have to be done through your employer, however, so you’ll need to find out if your organization offers it. If it’s only offered by one parent’s employer it will often make sense to take advantage of it, even if that person is the lower earner and other financial adjustments will need to be made.

Your tax savings will depend on various factors, such as your marginal tax rate, but many families see around $2,000 in tax savings, when using the full $5,000 allowance.

Check on Any Other Tax Advantages Available to You

There are other tax breaks available to parents that can really help offset the cost of childcare, such as the Child Care and Dependent Tax Credit and the Child Tax Credit. To claim tax credits for childcare you may have to provide evidence of childcare costs. This can include regular daycare, a day camp during school holidays, or the cost of a nanny.

To claim the Child Care and Dependent Tax Credit you must have income earned from a job that required you to pay for childcare. It can be claimed for children up to the age of 12. The Child Tax credit can be claimed by families with a child or children who are 16 or under as long as the child is claimed as a dependent on the tax return of the person applying for the credit. This credit is not directly linked to childcare costs.

Claiming tax credits can get complicated. Ask your tax preparer or a financial advisor to take a close look at your situation and make sure that you’re claiming all the tax breaks you can.

Explore Income-based Subsidies

Low income families may be eligible for childcare subsidies if they need childcare in order to be able to work, train, or study.

These include state assistance programs, usually run by individual states with money from the federal government, and other regional programs run by local government and sometimes by non-profit agencies.

Military families may also be eligible for military family assistance, depending on their circumstances.

Consider a Career Change

While it may not be practical for every family, there are certainly those who make a big changes to accommodate their family situation. That might involve transitioning to remote work (with your current company or a new one), taking on shift work with the possibility of working opposite shifts to your partner, or changing career completely.

There’s a reason so many teachers also have kids of their own. At least some of them retrained after they had kids and realized the benefits of a job that fitted in with their kids’ school schedule.

Get Support in Place

It’s not possible to magic up a support network, but getting as much help in place as possible will allow for less stressful parenting, as well as potentially lower childcare costs. Whether it’s friends, family, neighbors, or other parents you can trade childcare with, having a village to help you raise your child will make all the difference.

Think Long-term

The cost of childcare is sometimes overwhelming, but many parents comfort themselves with the fact that it is only needed full-time for a relatively short amount of time.

Assuming you’re putting your child into the public school system as soon as they’re old enough, your childcare costs will drop, but they won’t disappear completely. You may need before and after school care, school holiday care and backup care for sick days, snow days, and teacher training days.

Whatever your long-term childcare options are going to look like, planning ahead can help you feel in control and save money.

Karen Banes is a freelance writer specializing in entrepreneurship, parenting and lifestyle. She writes articles, website content, ebooks and the occasional award winning short story. Her work has appeared in a range of publications both online and off, including The Washington Post, Life Info Magazine, Transitions Abroad, Brave New Traveler, Natural Parenting Group, and Copia Magazine. Learn More About Karen