Tuesday, January 12, 2010

The Child Care Deduction is a Joke

It is tax time, or soon will be. One of the major deductions we have is the cost of child care. Specifically, we have a dependent care reimbursement account, which is a pre-tax deduction from pay that then can be used to pay for child care. This is certainly helpful. The thing is, the total limit for the year is a joke. It hasn't been raised in ages. It hasn't kept up with inflation. It hasn't kept up with anything.

Right now, with two kids, in a cheap day care, our day care costs are about $341 per week. With a nanny we paid over $500 per week. That comes to either $17,700 per year or $26,000 per year. And the limit on a child care dependent reimbursement account for the year? $5,000. As I said, it is a joke. Especially since the costs of child care in my area are probably rock-bottom compared to many other areas of the country. And this is with only two kids. You have many families with more kids. That $5,000 amount is a flat rate, regardless of the number of kids you have.

This really needs to be increased. In fact, an increase is ridiculously overdue. Unfortunately, I don't see an increase on the horizon. I'd say write your congress person, but I don't think three letters will do it.


tina FCD said...

I have never heard of that before.

DBB said...

It is like a health care spending account. Also, I think the same level of deduction is available for child care if you don't have such an account set up. Of course if you use one, you don't get the other.

DBB said...

Deleted SPAM.