By now, you’ve heard the numbers: President Donald Trump’s plan to make child care affordable could cost taxpayers $500 billion.
When first daughter Ivanka Trump presented the details to Washington lawmakers, she called it “a very comprehensive and really revolutionary plan.” And President Trump, in a speech before a joint session of Congress, promised to “work with members of both parties to make child care accessible and affordable.” But, according to Bloomberg News, congressional Republicans reportedly balked at the price tag. And even conservative policy experts have been skeptical of whether the plan goes far enough to provide results, especially for those families who are most in need.
Breaking down all of the elements of the plan is complicated, but the biggest piece of it is relatively straightforward: The President has proposed a child care tax deduction that would allow individuals who earn less than $250,000 a year (or couples who earn less than $500,000) to deduct a certain amount — up to the average cost of child care in their state — from their income taxes. The deduction would cover up to four children per household from birth through age 13.
Using publicly available information — combined with previously unpublished data from the Care Index, a national survey conducted in 2015 — Care.com data analysts investigated how much money families at different income levels would save via the tax deduction.
(Note: There are other elements to Trump’s plan which are designed specifically to help lower-income families. Click here to read our discussion of the economic impact of those elements, and the difference between tax deductions and tax credits. The analysis below pertains strictly to the tax-deduction portion of the plan.)
Below, we’ve charted the cost of child care — and the average savings from a child care tax deduction — for individuals and families at different income levels.
Here’s what we found:
- Over 10 million households with children pay for child care weekly, and they will be the main beneficiaries of the deduction.
- Another 7 million households with children pay for child care occasionally (i.e., for babysitting or summer care) and could also benefit from the proposed deduction.
- Married families that earn over $225,000 per year and pay for weekly child care will see the largest tax savings from the plan, averaging $5,500.
- The benefit is highest for this group because they are in the 33% tax bracket and have the highest child care expenses of any income group — averaging $24,592 per year for families that pay for weekly child care.
- Single parents earning less than $37,500 per year will see the smallest tax savings from the plan at $1,000 on average. They are in the 12% tax bracket and have the lowest child care expenses of any income group — averaging $8,942 per year for families that pay for weekly child care.
Below, you’ll find a table with the full data set.
| Tax Filing Status | Income Bracket | Tax Rate | Total Households With Children Under 18 (1,000s) | % of Households | % With Weekly Child Care Expenses | Households With Weekly Child Care (1,000s) | Average Weekly Child Care Expenses | Average Annual Child Care Expenses | Average Number of Children | Average Deduction | Tax Savings from Deduction |
| Single | $0 – $37,500 | 12% | 8,146 | 20% | 26% | 2117 | $ 172 | $ 8,942 | 1.57 | $ 8,942 | $ 1,073 |
| Single | $37,500 – $112,500 | 25% | 6,697 | 16% | 26% | 1745 | $ 264 | $ 13,736 | 1.50 | $ 13,736 | $ 3,434 |
| Single | $112,500+ | 33% | 1,563 | 4% | 34% | 528 | $ 269 | $ 13,989 | 1.47 | $ 13,989 | $ 4,616 |
| Married | $0 to $75,000 | 12% | 9,894 | 24% | 21% | 2080 | $ 198 | $ 10,284 | 1.81 | $ 10,284 | $ 1,234 |
| Married | $75,000 – $225,000 | 25% | 12,345 | 30% | 28% | 3426 | $ 294 | $ 15,263 | 1.73 | $ 15,263 | $ 3,816 |
| Married | $225,000+ | 33% | 2,941 | 7% | 32% | 943 | $ 473 | $ 24,592 | 1.74 | $ 16,649 | $ 5,494 |
Methodology
This analysis compares how families with children under 18 at different income levels could be impacted by the Trump Child Care Tax Deduction. For each income bracket outlined in the Trump Tax Deduction (as presented in the Tax Foundation’s analysis), Care.com analysts estimated how many households with children would fall into the bracket using the Current Population Survey (CPS) from the U.S. Census Bureau. All married couple households were counted as married filing jointly, and all other households were counted as single filers.
The percentage of households with weekly child care expenses, the total weekly child care expenditures and the number of children in the household were measured using the Care Index Survey, a national survey sponsored by Care.com and conducted by Hanover Research in October 2015. The Care Index Survey had 15,000 respondents and used a quota sampling method to create a representative sample of US households with children under 18 by income, marital status and employment.
Only families that pay for child care at least once per week were included in the tax analysis. The Trump plan does not specify whether it will include only child care that allows parents to work — as does the current Child and Dependent Care Tax Credit— or other child care during non-work hours. This analysis focuses on weekly child care arrangements during work hours, but the benefits to families would be larger if other child care expenses were also deductible.
The Trump plan calls for allowing families to deduct the cost of child care up to the average cost of care per child. According to the Care Index, the average annual cost for full-time care for one child in a child care center in the U.S. is $9,589. The average annual child care expenditures per child were calculated by multiplying the weekly child care expenditures from the Care Index survey by 52, and then dividing by the number of children. The average tax deduction is the average annual child care expenditures per child or the US average cost of care per child — whichever was lower — multiplied by the average number of children. The tax savings is the average deduction multiplied by the tax rate in that bracket.
In cases where the income brackets did not align exactly, the complete C.P.S. income group was included. For example, the C.P.S. divides income groups into $5,000 increments, so the $37,500 and under income group includes all households earning less than $40,000. The Care Index Survey used $25,000 increments for income categories, so single-filers with less than $37,500 are approximated by the group earning $50,000 or less, the $37,500 to $112,500 group is based on the group earning $50,000 to $100,000, and the $112,500 and over category is based on those earning more than $100,000.
The Trump plan released in September 2016 calls for granting families with a stay-at-home parent access to a child care tax deduction. Since no details were offered about the amount of that deduction, it is not included in this analysis. A tax benefit for families with a stay-at-home parent would expand the number of households that would benefit from the child care tax plan.
