I'm going to take my "sheesh daycare is expensive" rant to an all new level today. Let me start off by saying that we really got off easy on the daycare expenses last year. With Ben at home starting in April, Scooter didn't really have any daycare expenses to speak of. And then there was the hospitalization and subsequent keeping Bubba at home debacle that cut another month and a half out of daycare expenses. And then we hired a part time nanny for 7 months before putting Bubba back into daycare out here. Incredibly, our part time nanny was cheaper than full-on daycare, only we got individual attention and trips to the park everyday.
It was a win-win, really. Except for the times when Bubba didn't sleep as late as he should have or when he would randomly decide not to nap. Also, despite the one-on-one attention, there could have been more learning activities for Bubba. But again, you get what you pay for, and we were skating by on $200 a week. If we add up our expenses for the year, we're looking at almost $8,000 in daycare expenses.
...and cue the rant. Taxes. Do you know what the amount of credit the government allows is? Up to 35% of your expenses up to $3,000 for one child and $6,000 for two or more children, depending on your income (the more you make, you qualify for less credit). Those qualifying expenses are then reduced by any dependent care benefits (or flex acct dollars) offered by your employer. Also...even if both spouses have the option of a flex account, a family may only put up to $5,000 into a dependent care pre-tax account. What does this mean? Well, we can start with 2010's tax return for us.
We spent $8,000 on daycare for Bubba. We had $3,000 in qualifying daycare expenses (we maxed it out!). Except now, we subract the $5,000 Ben had put into his dependent care flex account, and we're left with 0. We were able to use $0 credit on our tax return. Ok, I understand. We couldn't claim Scooter this year. I get it. The most we'd ever be able to use is $1K. But what about our next year's return?
We'll spend $13,000 on daycare for Bubba, 0 for Scooter. So...we'll have $3,000 in qualifying expenses, minus the $5K in flex, and...what? 0 again?! And this is where I get fired up. The range of care costs for a child in Bubba's age range is from $4550 to $18750 around the nation. Obviously, the average for the US is somewhere in the middle, but still...we can take the full amount of mortgage interest paid as a deduction, but only $3,000 or $6,000 in child care expenses? Buying a home is a choice. Often times, sending a child to daycare is a necessity. According to a 2010 survey conducted by the National Association of Child Care Resource and Referral Agencies, in 40 states, the cost of a year's worth of child care exceeds that of a year of tuition and associated fees at a 4 year public university. And yet, we can only put $5k in a dependent care flex, and we can only qualify for $3,000 in expenses for a tax credit (which is then negated by the flex money).
Generally, when a family is sending their child to daycare, they are young. Maybe not quite starting out in their careers, but pretty close. Hardly the time to be able to cough up $10,000 a year in daycare. Oh, and there's no 529 account for daycare. Not that a new parent would have had the foresight to invest in one before their child was even born, anyway. In all of the hooplah over the federal budget and the American tax payor, how about taking a look at policies surrounding encouraging Americans to work? I've known several people who have left the workforce because between commuting costs and daycare, it just wasn't worth it. These are bright, productive people who are taking themselves out of the workforce. These are taxpayers that are leaving the pool. But you know....let's just keep on giving first time home buyers credit and deducting our mortgage interest while young mothers and fathers struggle to find affordable, quality care for the next group of taxpayers. That makes sense.
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