Many working families who struggle to make ends meet find that housing and living costs are not the highest burdens they face. Instead, a new study shows that the rising costs of reliable child care is what puts a dent in most households' income.
The results of a recent report from Child Care Aware of America reveal that the price of paying for child care exceeds rent costs in some states, putting a significant financial burden on working Americans. In addition, the costs of care vary by state, with facilities in New York, Massachusetts and Wisconsin being the least affordable. For instance, single parents who enroll a four-year-old child in daycare in New York can expect to spend roughly 44.8 percent of their income on these services. This percentage drops to 13.1 percent for two-parent households. In Massachusetts, the former can expect these costs to account for 41.8 percent of their income or 11.1 percent for two-parent families.
Analysts say that many families are now being forced to make tough decisions about child care, such as whether one working partner should leave the workforce to care for children and save money.
"Parents have to make some very difficult decisions: Do you pay your child care or do you pay your rent?" Marsha Basloe, executive director of New York's Early Care & Learning Council, told CNN Money. "In this economy, when they're really just trying to make ends meet, families are moving to informal childcare."
The federal government provides some tax relief to working parents in the form of the Child and Dependent Care Tax Credit and the Child Tax Credit. The CDCTC is available for eligible working families who cover expenses for child care, or the care of adult dependents or incapacitated spouses. Taxpayers may claim up to $3,000 in child care expenses for a child or dependent or up to $6,000 for a second child or dependent. The amount of the credit typically falls between 20 and 35 percent of the overall expenses, and the percentage individuals may claim depends on their income.
Parents may also be eligible to claim the Child Tax Credit, which amounts to $1,000 for each qualifying child. In order to be eligible, however, children must qualify as a dependent and fall under several stipulations. For example, the child must be under 17, live with the taxpayer for more than half the year and not provide more than half of his or her own financial support.
Federal benefits can provide some financial assistance to families who are struggling to meet their child care obligations. Individuals who enroll their children in these facilities should consider speaking with their tax preparer
to determine if they are eligible for related credits or deductions.
Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.
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