9 child care subsidies every family should know about

June 22, 2020

Raising children is expensive. Many of us began budgeting for our new babies before they even arrived, but few could have predicted just how rapidly the costs of child care would grow over the last few years.

According to Care.com’s 2020 Cost of Care Survey, which surveyed over 3,800 parents across the country, 72% say they spend 10% or more of their household income on child care, compared to 71% in 2019. And more than half of families (55%) report that they spend at least $10,000 per year on child care, which is more than the average annual cost of in-state college tuition ($9,410) per College Board.

The good news is there are many options available to help you pay for quality child care. See which resources you could take advantage of to lower the costs of raising your child.

Government programs and subsidies

1. State assistance subsidies

The federal government provides money to individual states to help offset the costs of child care, but the aid available to families varies widely by state.

Many subsidies have strict income guidelines and are generally for families with children under 13. (The age limit is often extended if the child has a disability.) Be sure to check the requirements, because many subsidies permit home-based care, but some only accept a daycare center.

How to get it: Most assistance is administered through the Child Care and Development Block Grants. Scroll to the bottom of this article to find the contact information for your state. If you need to use an authorized provider, ask if they will put you in touch with an agency that can help you find one.

Some states distribute funds through social or health departments or agencies. For example, the Children's Cabinet in Nevada can refer families to providers, help them apply for subsidies and can even help families who want to pay a relative for care. North Carolina's Smart Start is a public/private partnership that offers funding for child care. Check the National Women's Law Center for each state's child care assistance policy.

2. Military family assistance

The federal government offers subsidies to members of the military and the Department of Defense. Eligibility is determined by each branch of service or agency.

How to get it: Visit Child Care Aware of America to find out the specific requirements for your branch or agency.

Tax subsidies

3. Child and Dependent Care Tax Credit

Working families can qualify for a tax break using the Child and Dependent Care Tax Credit. With this tax credit, you are able to itemize up to $3,000 in child care expenses per child ($6,000 maximum).

How to get it: When you file your personal income tax return, use IRS Form 2441 to itemize up to $3,000 in child care expenses per child ($6,000 maximum), which brings about $600 per child ($1,200 maximum) in tax savings.

If you have more than one child and have access to a Dependent Care Flexible Spending Account (FSA), the rules are slightly different.

"Families can't use their FSA and Form 2441 for the same expenses,” says Tom Breedlove, director of Care.com HomePay. “So that's why a family that has already set aside the maximum of $5,000 in their FSA can only claim $1,000 toward the Child and Dependent Care Tax Credit.”

If you do have an FSA, you can use Form 2441 for the additional $1,000 in child care expenses to save an additional $200.

4. Child Tax Credit

To maximize your money, make sure that you are also taking advantage of the child tax credit. As soon as your child is born, you become eligible for the child tax credit of up to $2,000 for every child under the age of 17.

How to get it: Eligibility and the amount you can claim is dependent upon a few factors, so visit the IRS website to see if you qualify.

Earned Income Tax Credit

The EITC is a tax credit available to low- to moderate-income wage earners. The credit can range from a few hundred to several thousand, depending upon how many children you have and what your filing status is.

How to get it: Visit the IRS website to see if you qualify for EITC and how to file.

Employer subsidy programs

5. Dependent Care Accounts

The federal government offers this type of Flexible Spending Account through your employer. Like the Child and Dependent Care tax credit, families are eligible if both spouses are working or going to school and if their children are under the age of 13.

If your job offers a Dependent Care Account, you can put aside up to $5,000 in pre-tax dollars to pay for child care expenses. If both you and your spouse have access to this FSA, the family limit is $5,000 — but you could get as much as $2,000 in tax savings if your combined contributions reach the maximum.

How to get it: Talk to your Human Resource department to see if a Dependent Care Account is available to you and how you can get started. 

6. Child care network programs

Some larger companies have established relationships with child care providers and offer a discount to employees who use the providers from that network. Providers in these programs are typically available for both short- and long-term child care.

How to get it: Check with your Human Resource representative to see if this is something that your company offers.

Subsidy programs for students

7. School-sponsored subsidies

If you or your spouse is a student, your school may offer financial assistance for paying for child care. For instance, Oregon State University offers a plan that helps pay for various types of care. Some universities also offer low-cost, on-campus child care for eligible students.

Some states have grants for degree-seeking students to help pay for child care, but they're often distributed through offices of varying names. In Massachusetts, the funds are issued through the Executive Office of Education; in Oregon, it's through the Office of Student Access and Completion; and in Utah, it's through the Office of Child Care.

How to get it: Because these programs are specific to each school, your best bet is to check with the individual college or university.

Other subsidy options

8. Sliding fee scales

Some child care centers offer a sliding scale or a scholarship for low-income families who can't afford the regular rates.

How to get it: Investigate centers to find your top five, and then ask about rate options.

9. Sibling discounts

Some child care centers will offer a discount if you register an additional child.

How to get it: Once you have decided on your top five centers, ask about a sibling discount. If your older child is already attending daycare, ask if this is something they offer for additional children within the family.

Child care assistance grantee contacts by state & territory

Tips and stories from parents and caregivers who’ve been there.

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