Cut Day Care Costs
Costs can range from $100 to $400 per week, per child, and ranges higher for infants who require more intensive care. Two children in day care can easily amount to $40,000 per year in annual costs.
Some families may be able to shave off $1,030 from these expenses by understanding the tax code. These savings don't sound like much, but over the course of several years is does add up. If you child has special needs, the tax savings may last a lifetime.
Childcare rates can seem very high. If you have a child in day care, the federal government provides two options to cut day care costs: the Child Care Tax Credit, and a Day Care Flexible Spending Account (DCFSA). But it’s important to choose wisely, as you can choose only one of these methods to cut day care costs.
With a Flexible Spending Account, you can cut daycare costs by $1,030 each year when compared to the Child Care Tax Credit. To be eligible, you simply need to have one child enrolled in a day care, or after school program; be in the 25% tax bracket or higher; and pay payroll taxes.
This program allows you to pay up to $5,000 of your childcare expenses using pre-tax dollars. Even if you have more than one child in day care or preschool, and your tax bracket is different.
Dependent Care FSA One way to reduce your expenses for child care is to make certain you are using the right tax savings vehicle for your personal situation. Many growing families find that a Flexible Spending Account helps the most. But the best approach depends upon a variety of factors unique to every family.
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