Child Care Costs

By Vanessa Rasmussen, © 2004, All rights reserved.

Childcare costs vary quite a bit throughout United States. The Children's Defense Fund states that full time child care in Texas would cost around $4200 a year, whereas if you were in Boston you would be paying as much as $9000 a year. Child care is probably your biggest expense if your child is not in school yet. Private nannies may cost anywhere from $2000 to $5000 a month. Day care centers aren't cheap either. A preschooler would be charged at least $5 an hour.

There is no denying that childcare costs are huge. However, if you do your homework well, you may be able to achieve substantial savings.

Here are some tips to help reduce childcare costs:

  • Always shop around before deciding on a daycare center or private nanny. Ask parents in your neighborhood as well as workplace.
  • Approach childcare associations. These may help you save a lot of money.
  • Avail all tax benefits, especially the Child Tax Credit. This entitles you to a $500 tax credit for every child below 17 years of age. It's available for taxpayers with an adjusted gross income of $75,000 or less who file a single return. The credit is reduced by $50 for each $1,000 or fraction above those amounts. Ensure that you keep track of all your childcare costs and save receipts. Besides this, there are other deductions that may be useful. For more information visit the IRS website at
  • You may also want to check out the Flexible Spending plan. This plan allows you to deduct the costs of childcare (as much as $5,000 a year per household) from your pretax income, thereby lowering your taxable earnings. Depending on your income level this plan, usually offered by your company, may yield more benefits than the Tax credit. However, you can chose only one option, so chose wisely.
  • If you put your child in a daycare center ensure that you get there on time. Daycare centers charge exorbitant amounts of money if a parent is late. Coordinate your schedule with your partner so your child can be dropped off later or picked up earlier. Anticipate traffic and be on time (or early) for pickup.
  • Split the cost of a nanny or au pair with friends or neighbors who have children. This may save you considerable amount of money. You would be better off swapping with friends, neighbors, or co-workers with children for short time periods.

Copyright 2001, 2004. All rights reserved. Any reproduction of this article in whole or in part without written or verbal permission is strictly prohibited. For information about reprinting this article, contact the copyright owner: Vanessa Rasmussen, Ph.D, Starting a Day Care Center,