Need Affordable Childcare? Consider These Tips
May 12, 2020
Childcare costs have increased in an exponential way as the rising cost of childcare now exceeds the cost of mortgages and annual tuition rates in most of the United States. According to the Economic Policy Institute, the average annual cost of infant care in Georgia is $8,530 or $711/month. That is 18.4% more per year that the cost of in-state tuition from a 4-year college. Infant care for 1 child would take up 15.5% of a median family’s income in Georgia. Considering most families have more than 1 child, the percentage of income spent on childcare is likely much more. This number is especially troubling, considering that the U.S Department of Health and Human Services proposes that childcare is affordable when it costs no more than 7% of a family’s income. According to the data, that leaves just 16.8% of Georgia’s families who can afford childcare.
This information seems bleak, but there are some financial opportunities that can help offset childcare costs. These opportunities include:
- Federal and State Tax Credits
- State Government Programs
- Employee Benefits
Federal and State Tax Credits
- Child and Dependent Tax Credit (Federal)
- To families who paid care expenses for eligible child/adult
- Filer must have earned income (income from working)
- Pays percentage of care cost incurred up to $3,000/child or dependent
- Is a nonrefundable deposit, meaning it can bring your taxes owed to $0, but will not issue a refund
- A dependent child must be 12 or younger at the time the childcare is provided.
- You must provide the care provider’s name, address, and Taxpayer Identification Number — either a Social Security number or an Employer Identification Number
- Be sure to review accepted care providers. Accepted care providers do not include a spouse or other dependent
- Credit and Dependent Tax Credit (Georgia)
- 30% of federal credit, up to $315 for one child and $672 for two or more children.
- All Georgia taxpayers who qualify for the federal credit are automatically eligible.
This credit can be taken advantage of by anyone who meets the following requirements. The credit percentage decreases as earned income goes up, but never disappears completely.
- Child Tax Credit
- Offers up to $2,000.00 per child aged 16 or under
- Up to 1,400 of this credit is refundable
- You qualify if your modified adjust gross income is under $400,000 when filing jointly or $200,000 when filing individually.
- Not available at the state level for Georgia
- Earned Income Tax Credit
- Designed to benefit working people with low to moderate incomes
- 1 in 5 eligible taxpayers fail to claim this credit according to the IRS
- Refundable tax credit
- Anyone with earnings of less than $54,884 should check whether they qualify, even if the taxpayer does not have children
- Not available at the state level for Georgia currently
State Government Programs
The state of Georgia offers 2 very helpful programs that can make childcare much more affordable or in some cases, free. These programs are the Childcare and Parent Services (CAPS) Program and Georgia’s Pre-K.
CAPS offer low income families subsidies to pay for childcare. CAPS cover cost for children 12 and younger and assist parents with special needs children up to age 17. CAPS allow families to select any childcare provider of their choosing within the CAPS network. There are several requirements that must be met to be considered for the program:
- Resident of Georgia
- Meet income requirements
- Participate in one of the following approved activities
- Working at least 30 hours per week
- Attending a vocational school an average of 24 hours per week (for up to one year)
- Combining employment and vocational school attendance for an average of 24 hours per week (for up to one year)
- Attending middle school, high school or GED courses full time, if you're not yet 21 years of age.
While CAPS is a need-based initiative, Georgia Pre-K is open to anyone to apply, however spots are limited so it is best to inquire early. Georgia Pre-K is a completely free public pre-school funded by the GA lottery system. It partners with local campuses to offer state approved pre-school curriculum. If your child is a resident of Georgia and 4 years old by September 1st, they may attend Georgia Pre-K. In Middle Georgia there are several schools to select from, including:
- CGTC Child Development Center
- Meadowdale Learning Centers
- Little Reasons Learning Center
- Sandy’s Sandbox
There are several other schools in the community not mentioned above that offer Georgia Pre-K. Again, spots are limited, and students are selected through a lottery based off all applicants for that school. For this reason, it is beneficial to select 2 or 3 different programs in case your first choice is full.
The dependent care flexible spending account allows parents to save up to $5,000.00 in pretax money to cover a range of childcare related expenses. This is a spending account set-up through your workplace and allows individuals to pay for childcare expenses for children 12 and under, while lowering their taxable income. The expenses can include:
- Before and after school care
- Babysitting and nanny expenses
- Daycare, nursery school, and preschool
- Summer day camp
Make sure to save receipts and gather other information such as the businesses’ tax ID number to submit the claim for reimbursement from your spending account. There are some limitations to what may be covered so be sure to consult a tax advisor if you have specific questions.
Childcare is expensive and nothing indicates that it will be decreasing in cost any time soon. Be sure to take advantage of any opportunity that is applicable to your situation to help make childcare more affordable for you and your family.