There are a multitude of ways parents can balance working life and raising their children. Some parents change careers to something with more flexible hours. Other parents alter their schedules or reduce their amount of working hours. However, these options are not always possible, and this creates one of the most significant dilemmas in modern parenthood. How do parents provide the best opportunities for their children to thrive and have enough money to pay for them? When it comes to caring for their children, many parents are in a position in which a choice must be made: who is going to stay home to take care of the kids and put their career on hold, and who is going to continue working?
An alternative solution to use or continue using a professional child care provider while remaining in the workforce. For most working single parents, and even many households with two working parents, professional child care is the only solution to this problem. This creates a dire need for affordable, quality child care for young children. However, the cost of high quality child care has dramatically increased over the last two decades. Child care costs have been shown to be more expensive than the median housing rental costs in all 50 states, making it essentially unaffordable for most parents. Many will opt for lower cost child care while acknowledging that this choice usually decreases the quality of care their child receives. Though naturally, this creates a few questions: is the high cost of child care worth the expense, and is there a more flexible way to pay for these expenses?
Research has shown that consistent child care helps children better understand and prepare for a structured education system. Child care and preschool programs have also demonstrated an increase in cognitive and social skills before beginning kindergarten. High-quality child care has also been linked to a reduced need for remedial tutoring and even decreased rates of juvenile delinquency. It is important to note that the cost and quality of child care are dependent on various factors such as age, geographic location, and type of setting. Unfortunately, many low and middle-income families struggle disproportionately to afford child care. Children of color, English language learners, and children from low-income families are often the ones who benefit the most from educational high-quality child care. Children who take part in high-quality child care programs are also less likely to rely on public assistance and are more likely to have increased earnings over their lifetime.
The federal government issues child care and development block grant funds to states and counties across the nation. These funds are distributed at the local level to eligible low-income families. The demand for these daycare and child care services is so high that certain parental participation criteria are sometimes attached to the funds. Not all low-income parents can meet these conditions, and there are frequently long waiting lists to become eligible. The subsidy money does not go far enough to provide high-quality care for everyone. This places an unequal and higher burden on lower-income parents. They must work to survive and provide for their children, and in turn, their children may receive lower-quality child care due to lack of access. This may further and continue income inequality into the next generation.
High-quality child care can be expensive, but it has clear benefits for both parents and children. Working parents can keep an active work schedule if they can send their young children to child care. For many parents, it is an appealing option to leave the workforce to care for one’s children full-time. However, in the long run, this may not be the best solution because of the potentially long-lasting effects on a family’s long-term financial security. The effects can influence the finances of parents in a variety of ways, such as loss of potential work experience or promotions, decreased earnings, and a reduced likelihood of ever returning to work. For many families, it can be the factor withholding their ability to save money for housing, college, or retirement. Leaving the workforce may hinder families from future financial growth and security.
There are also important tax credits that can help parents afford some of the high costs of child care and save additional money. The primary tax credit that benefits all parents with dependent children is the child tax credit, which can be worth up to $2,000 per qualifying child. Parents that use a professional child care provider are entitled to claim the child and dependent tax credit. The tax credit can be used to claim expenses on qualified professional child care providers or various household services that benefit the well being of the child. The child and dependent tax credit apply a tax credit of 20-35% on the first $3,000 spent on professional child care. For two children, this increases to a maximum incursion of $6,000. The specific amount able to be applied to the tax credit is determined by the income of the parent or parents. Working parents using child care should take advantage of this and other tax credits, which we will explore more in-depth in our next blog post!
Most families pay for the majority of their child care using cash or debit transactions. There are other, more flexible ways parents can manage those payments. When surveyed, many parents stated that they would be willing to use a credit card or enroll in a program to finance some of their child care expenses. Financing can help parents manage the immediate financial burden in a more convenient and workable way. Child care financing is one of the best ways parents can take back control of their lives. It can allow parents the chance to return to the workforce with the knowledge that their children are well taken care of.
With Jump Start’s line of credit program, we want to present an easy, innovative solution to the problems of being a working parent while also receiving high-quality care for your child. Our company aims to alleviate the burdens of being a working parent by providing financial options and flexibility to child care payments. We are able to offer a dedicated line of credit for up to 24 months of child care for children aged 2-6. By partnering with qualified child care centers, we can reduce monthly payments up to 50%. We create an empowering way for working parents to relieve some of the financial stresses of child care. We also want to be as transparent with our line of credit program as possible, so we offer no hidden fees, no application fees, no prepayment penalties as well as a fixed rate of interest. This allows parents to take advantage of our program as they need it to spread the costs of child care over time. It also ensures that working parents have access to child care when it is needed most.
The goal of our company is to provide credit to meet the needs of working parents and in turn, reinvest in future generations. We believe parents should not have to choose between their careers and the wellbeing of their children. Jump Start is a compassionate solution to a pressing dilemma facing parents today.
Apply for free today!
The average American family spends approximately 15% of their household income on high-quality child care services. These costs are rising annually and for many parents, the costs are the biggest surprise when starting a new family. Parents who are working full or part-time can find the responsibility of balancing the care of their children and their work obligations very challenging. There are obvious benefits to adults having a fulfilling career while raising children, including personal growth and monetary gains. Fortunately, there is a way to regain some of these expenses by participating in tax-deductible child care. The IRS allows various tax credits for dependent children. This can be a great incentive for paying for child care.
Children and dependents can reduce the taxes owed and increase tax refunds in several ways. The primary way most parents save money on taxes is through the child tax credit, which is worth up to $2,000 per qualifying child. However, that is not the only tax credit available to working parents. There is another important tax benefit for many working families called the child care tax credit. The child and dependent care tax credit is for the expenses paid by working parents to qualified child care providers or related services. There are a few specific conditions that must apply in order to receive this tax credit and these will be discussed in detail below.
Child Care Tax Credit Requirements
The first condition is that the tax credit can only be applied for a maximum of two children. These children must be 12 years old or younger by the end of the tax year. There is an exception however if the child is physically or mentally disabled and is unable to care for themselves while their parents are at work they can be claimed at any age.
A second condition is that parents can only claim child care expenses while they are working, looking for work, or in school full time. Expenses outside of that time frame are not covered. Expenses such as paying the babysitter for date night; are considered personal expenses and are not eligible. In addition, these child care costs must be going towards a qualified provider. They cannot apply to additional expenses such as food, lodging, clothing, education, and entertainment. However, the expenses can apply to household services that are at least partly for the well being and benefit of the child, such as housekeeping.
Third, in order to claim the tax credit, couples must either be married filing jointly or filing as a single taxpayer. The appropriate tax filing used may alter whether or not the child care tax credit is available. For example, if you file taxes separately from your spouse the tax credit is unavailable. Also, the parent, or parents if married, must have earned income. Investment or dividend profits do not count. This underlines the fact that this credit was developed to be a helpful tax benefit working parents, while they actively work.
Finally, the child care provider must also be proven to be qualified, legitimate, and legal to work. This can be done by providing the child care provider's name address and Social Security number or Employment Identification Number within tax returns using IRS form W-10, Dependent Care Provider’s Identification, and Certification. It is possible to use a family member but again, specific conditions must apply. They must be at least nineteen. They cannot be a secondary claimed dependent. They cannot be your spouse and they cannot be the parent of the child. However, there are additional social and educational benefits in opting to using an experienced high-quality child care provider. Many studies have shown that children who regularly attend child care are better prepared cognitively and socially when beginning the structured education system.
What Are the Other Stipulations?
The child care tax credit applies a tax credit of 20-35% on the first $3,000 spent on professional child care. For two children this increases to a maximum incursion of $6,000. The specific amount able to be applied to the tax credit is determined by the taxable income of the parent or parents. If the household income is at least $15,000 for the year, it is possible to deduct 35% of child care from the taxes owed. However, if the household income is $43,000 or above for the year, it is only possible to deduct 20% of child care costs when filing income tax returns. It is important to note that there is no upper-income limit to claiming this benefit.
Other Tax Credit Opportunities
An additional tax credit working parents can receive is the Earned Income tax credit. The earned income tax credit primarily benefits those with more than two children. The eligibility of receiving this credit is increased by having additional children. Though there is an exception if income is low, the parent is working, single, and has only one child. This condition also qualifies them for the earned income tax credit. The credit can greatly reduce taxes owed and increase tax returns.
Some employers are able to establish and offer a dependent care account. Through one of these accounts, it is possible to set aside some pre-taxed dollars for child care costs. ‘Pre-taxed dollars’ are earnings taken out of a paycheck before taxes are calculated. These accounts are limited to $5,000 for two working parents or $2,500 for each parent if they are not filing together. These accounts are limited by the families’ earned income. It is not possible to claim an amount that is greater than the earned income of either parent. Both parents must be working in order to use a dependent care account. It is possible to use both a dependent care account and still claim the child care tax credit. However, any money contributed to the dependent care account must be subtracted from the maximum amount of tax-deductible child care expenses you can claim under the child and dependent care credit.
Through combining tax credits along with Jump Start’s line of credit program, parents can see a reduction in the burden of high child care costs through reduced monthly payments. We also pay qualified child care providers directly, which ensures that those costs only go to child care expenses. Our goal is to help parents provide quality child care for their children in a way that makes sense while reducing monthly expenses. Learn more about us today!
*Nothing in this article should be construed as financial or tax advice. Consult with your tax advisor to determine tax credits that apply to your personal circumstances.
The holidays are here! Holidays are both an exciting and stressful time. With so many activities and distractions that grab our focus, we wanted to narrow in on some of the top child care provider holiday tips.
Time-off Planning: If you don’t already know your provider’s vacation time/holiday policy and schedule, make sure you take time to get familiar with it. If you have time off of work planned for the holidays, your provider may or may not allow credits toward your monthly child care bill. In addition, your provider may be closed certain days that may not align with your employer’s schedule, so make your back-up plans now. If you have kiddos in the public school system, pull up their calendar to review the school closure dates. A little bit of preparation and learning what your child care resources are now will keep you from getting caught off guard later.
Don’t forget to coordinate plans with your provider so they can make sure to have the appropriate number of teachers available during the days they are open. There are strict requirements for teach/child ratios and if the center doesn’t think your child will be attending certain days, they may not be able to accept any last minute changes. Their appreciation will be more than you’ll ever know.
So. Many. Toys: Toys probably rule your child’s life. Are your closets already overflowing with toys? Wondering how you’re going to make room for more? Get your kids involved with clearing out closets to make room for this year’s loot. Is your child a natural hoarder? Set a limit on the number of toys they can keep. Separate out toys they no longer play with or are broken. Those that are broken, teach them the proper way to dispose (recycle versus garbage). Recycling toys may take a bit of effort, but is worth it. In some cases you may need to break toys apart into different types of materials. This can also be fun for kids to get involved with (everyone loves demo day!) and a great opportunity to teach them why recycling is important. Check with your local recycling center or research Earth911 which allows you to find places to recycle all types of goods in your local area.
Toys that are in good working order and gently used can be donated to local charities. If you can, take your kids shopping to have them pick out a new toy to donate to a local charity as well. Donating toys is a great way to teach your young children the gift of giving and open up conversations about families in need. Some charities to check out include: Father Joe’s Village, Passion 4 K.I.D.S., and Salvation Army. You can also check with your local preschool or church charity. There’s no shortage of ways to make use of those new or gently used toys.
So how about new toys received during the holidays? Our recommendation is to come up with a set number of new toys your child can play with for the next month and put the rest away and out of sight. At the end of the month switch them out. This does a few things; it helps prevent kids from getting overwhelmed with toys (usually leading to new purchases going unused) and keeps the excitement of the holidays rolling for the next few months as they get a fresh stash at set intervals. Try creating a calendar countdown to the next toy swap date. Let your kids cross off each day until the switch happens.
Learn About Other Cultures: Help educate your kids on different holiday beliefs and traditions. Not everyone celebrates the same holidays and as much as we love our own, it can be fascinating to learn about other holiday traditions. Something fun to do in the evening together is to research different holiday traditions with your kids. Set aside 10-15 minutes a few nights a week with the specific purpose of researching holiday traditions that are different than your own. Spend that time talking about what you find together and help your child understand and respect different beliefs. Another fun idea is to look up traditional holiday dishes for different cultures, and prepare them together.
Here are a few holidays to get your research started: Thanksgiving, Christmas, Kwanzaa, Hannukah, Three Kings Day, St. Nicholas Day, and Rohatsu. While researching other traditions, don’t forget to include a discussion about your own. As adults, we get caught up in making the holiday a success and forget to help our kids understand the roots of our own traditions.
So. Many. Emotions: Have you heard with extreme highs come extreme lows? Back-to-back holidays keep the excitement rolling in your household that build until a sudden drop-off at the end. That can be hard for kids to process. Start talking to your kids about what to expect after the holidays – not just once, but several times. Keep the conversation positive and remind them that the holidays come back every year.
Taking some time off for the holidays? Practice certain routines while kids are out of school that provide a sense of normalcy. Keep the same bedtime each night so body clocks don’t get out of whack. If kids stay up later when out of school there’s usually a period of readjustment when returning to a child care program/school that can be slightly painful for everyone involved. Include some time for learning, which can and should include some outdoor time discovering nature. Early learning also includes having them help you in the kitchen. Schedule some time with them to bake cookies or holiday treats. They’ll be rewarded with tasty treats and some new kitchen skills!
Take Some of the Pressure Off: The holidays are an exciting and stressful time – not just for you parents, but your kids too! We tend to put an emphasis on how our children’s behavior is getting extra attention during the holidays. I’m not here to knock the elf off the shelf, but we make our kids feel like their troubles are being watched by a broader audience during the holidays (little elves, big guy in a red suit, Krampus, etc). If they get into trouble, the pressure is on! Let’s face it. Kids are kids. They push boundaries, which is how they know what’s acceptable and what’s not. Their brains are still developing and impulse control is all over the place. They’re going to blow it, eventually. Our recommendation? Keep your traditions and take some of the pressure off. Move in the opposite direction and let your kids know all of their good deeds are being noticed. That ever-watching elf is hanging around to make sure their efforts are rewarded. Everyone wants to shine when they feel like their efforts are noticed!
We hope you found some of the tips here helpful. Feel free to drop a comment below on your favorite holiday, tradition, or tip on keeping your sanity during the holiday months. Regardless, on behalf of everyone at Jump Start Finance and our care center partners, we wish you the happiest of holidays.
Choosing a preschool can be tough. All parents want to provide the best early education for their child as possible. As parents, we all have different opinions on what's important at this stage of our child's life. Whether it be a structured environment, a creative learning environment, or a combination of both - there is no wrong decision. It comes down to what's right for you and your family.
Regardless of what you're looking for, there are resources out there that help you walk through the decision process. Below is a link to a checklist created by Child Care Aware of what to look for in a preschool. Guides like this can help us think through questions to ask in advance of enrollment so we feel confident about the decisions we're making for our children.
If you find the right preschool for your family, don't let cost be a barrier. Apply for Jump Start's line of credit program to help keep monthly costs where you need them.
Why is the cost of child care so high? Have you ever wondered where your child care dollars go or if it's even worth it? As published by the Center for American Progress there's a reason child care costs are one of our highest monthly expenses - and yes, it's worth it.
"Access to affordable, high-quality child care can help parents pursue their careers, work longer hours, or attend school and can have a long-term impact on families’ economic security."
"In addition to the immediate impact of affordable, high-quality child care, researchers find that access to this care produces significant societal savings for decades into the future. Participants are more likely to have improved health outcomes, increased future earnings, and reduced crime rates, meaning each dollar spent on early childhood programs is paid back several times over."
We're not just a team of seasoned finance experts, we're also working parents that love our careers and our kids. We're proud to provide a program that gives parents more options for providing the quality care their family deserves.