Childcare Costs Are Rising -- and Parents Are Struggling to Keep Up

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  • The cost of childcare has increased in the wake of the pandemic.
  • There are tax benefits available to parents who pay for childcare, but they might only go so far.

It's yet another expense that's soaring these days.

Childcare costs have long been a burden for working parents. But in the wake of the pandemic, they've soared even more.

A good 63% of parents say that childcare costs have increased over the past year, according to And that's forcing a lot of families to dip into their savings and make other difficult choices just to hold down a job and ensure their children are cared for.

The costs keep rising

The cost of hiring a nanny has risen about 20% over the course of the pandemic, reports, while babysitting and daycare costs are up 5% to 15%. These are big increases many families can't afford, especially at a time when inflation is driving up the price of everything from gas to groceries to utilities.

These days, the average weekly cost of a nanny is $694, while the weekly cost of a childcare center is $226. Meanwhile, parents who only need part-time care don't get much of a break. The weekly price tag for an after-school sitter is $261. All of these costs reflect a single child -- they're even higher to care for multiple kids.

Tax breaks could help -- to a point

The good news is that parents who pay for childcare are eligible for certain tax breaks. But those tax breaks might only go so far.

First, there's the option to sign up for a dependent care flexible spending account (FSA). Many people are familiar with the healthcare version of these accounts, but there's an option to set aside pre-tax dollars for childcare expenses, too.

Here's the problem, though: Dependent care FSAs max out at $5,000 per family. That's not a very generous limit for someone paying $226 a week for a childcare center. At 50 weeks a year, you're looking at a tab of $11,300.

Then there's the Child and Dependent Care Credit, which allows parents to claim a credit on their tax returns for childcare costs. Last year, the Child and Dependent Care Credit got a nice boost as a means of providing pandemic relief. But this year, the credit's value is more limited.

Calculating the value of the credit is also a little tricky, because you don't simply deduct your costs. Instead, you can claim a credit against a percentage of your costs, and that percentage hinges on your income.

If you have one child, you can claim a credit for 20% to 35% of up to $3,000 in childcare costs. For two or more children, you can claim a credit for 20% to 35% of up to $6,000 in childcare costs. So all told, the maximum value of the Child and Dependent Care Credit totals only 35% of $6,000, or $2,100.

Is help on the way?

President Biden has pledged to take steps to ease the financial burden of childcare on parents. But for now, there's not much relief to go around. That's putting parents in a really difficult spot at a time when so many are struggling to simply put food on the table.

In fact, it won't be surprising to see more people opt out of the workforce in the coming years due to the cost of childcare. That's something that could contribute to labor shortages, which isn't a good thing. But it might also do the trick of catching lawmakers' attention and inspiring meaningful change.

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