November 5, 2024 Breaking News, Latest News, and Videos

Column: Tackling Childcare Costs

Finding affordable, quality childcare is essential for many working parents. The current shortage of care options is helping drive up costs for parents across the nation. If you know you will be needing childcare coverage in the near future, here are some ways to plan for and manage this considerable expense of parenthood.

Know your options. Review available childcare arrangements and common hourly rates in your area.

  • Relatives and sitters. Individuals who are not associated with a sitting service generally charge more modest rates for childcare. If you pay for services from a family member, tax rules do apply, though a bit differently if a grandparent provides the care.
  • Nannies and au pairs. Hiring a nanny is often the most expensive childcare option. You’re paying for the convenience of a dedicated, in-home provider, but you may also need to fund room and board and make a car available for their use. A nanny-share arrangement can help reduce your cost for this form of care if you can get by with fewer hours of coverage or find someone willing to take on multiple children. Another option is to host an international au pair. Placed through an agency, this individual typically may provide up to 45 hours per week of in-home childcare in exchange for room and board, a weekly stipend and a modest education allowance. 
  • Daycare center. Centers tend to be more affordable than in-home help. While your children may not receive as much one-on-one time with a caretaker, daycare centers often provide a more social and educational environment.
  • Co-ops. You might look into joining or creating a childcare co-op. In these arrangements, parents take turns watching each other’s children. This is a low-or no-cost option for families that have some flexibility in their work schedules or work opposite shifts.

Consider the tax implications. To help parents remain in the workforce, the federal government offers tax relief for a portion of eligible childcare costs. 

  • For the 2021 tax year, the American Rescue Plan Act allows eligible parents to claim a tax credit for 50% of up to $8,000 in childcare expenses, for up to two children (maximum credit of $8,000). Depending on your income, you may be able to reduce your tax bill or receive a cash refund of the eligible amount. 
  • If you are paying someone to care for your child in your home, you are considered a “household employer” and have the additional responsibility of paying employment taxes. The IRS usually does not impose this “nanny tax” if the childcare provider offers their services at their own home or place of business. 
  • Note that parents who pay cash for childcare services without reporting those payments cannot claim the tax exemption mentioned above and risk legal penalties. 

Start saving. Any cushion you can provide your family before childcare costs kick in will be helpful. You’ll experience less pain when the time comes if you’re accustomed to accounting for this expense.

Get expert advice. A tax professional can help you realize the maximum tax relief associated with your childcare costs. Also consider meeting with a financial advisor to discuss this necessary expense impacts your short-and long-term savings goals. Together you can explore ways to improve your financial security as you watch your children grow.

###

Anthony Perez, MBA, CFP® is a Private Wealth Advisor with Orchard Financial Group, a private wealth advisory practice of Ameriprise Financial Services, LLC. in Los Angeles, CA.  He specializes in fee-based financial planning and asset management strategies and has been in practice for 19 years. To contact him, call 310.582.3500 | orchardfg.com | 12400 Wilshire Blvd, Suite 1210, Los Angeles, CA 90025.

Investment advisory products and services are made available through Ameriprise Financial Services, LLC, a registered investment adviser.

Investment products are not insured by the FDIC, NCUA or any federal agency, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value.

Ameriprise Financial and its affiliates do not offer tax or legal advice. Consumers should consult with their tax advisor or attorney regarding their specific situation.

Ameriprise Financial Services, LLC. Member FINRA and SIPC.

© 2022 Ameriprise Financial, Inc. All rights reserved.

File #3937671 (Approved until 03/2024)

<>Related Posts

Opinion: Fact Check: Why Vote Yes on Measure QS

November 1, 2024

November 1, 2024

Despite living in a famously progressive region, Santa Monicans are not immune from the same political misinformation and disinformation that...

SM.a.r.t Column: Lack of Oversight and No Accountability

October 31, 2024

October 31, 2024

S.M.a.r.t. periodically invites guest columnists to write opinion articles on topics of particular interests to our readers. Below is an...

SM.a.r.t Column: “Help! I’ve Fallen, and I …!!”, Cries Santa Monica!

October 25, 2024

October 25, 2024

Maybe fallen, but slipping for sure from being a desirable beachfront community that served all equally, the local residents who...

SM.a.r.t. Column: Vote

October 13, 2024

October 13, 2024

In a polarized country or City every vote counts. Regardless of which side of any issue or candidate you support,...

SM.a.r.t Column: Fact-Checking Election-Season Windbaggery

October 6, 2024

October 6, 2024

Claim: The state is requiring Santa Monica to build 9,000 apartments.Answer: Partially true, partially false. Santa Monica has a pretty...

SM.a.r.t. Column: Public Safety and Traffic Enforcement Can Help Save Lives and Revitalize Santa Monica’s Economy

September 29, 2024

September 29, 2024

We wholeheartedly endorse the candidates below for Santa Monica City Council. Their leading campaign platform is for increased safety in...

SM.a.r.t Column: Crime in Santa Monica: A Growing Concern and the Need for Prioritizing Public Safety

September 22, 2024

September 22, 2024

By Michael Jolly Over the past six months, Santa Monica has experienced a concerning rise in crime, sparking heated discussions...

SM.a.r.t Column: Ten New Commandments

September 15, 2024

September 15, 2024

Starting last week,  the elementary school students of Louisiana will all face mandatory postings of the biblical Ten Commandments in...

SM.a.r.t Column: Santa Monica’s Next City Council

September 8, 2024

September 8, 2024

In the next general election, this November 5th, Santa Monica residents will be asked to vote their choices among an...

SM.a.r.t Column: Part II: The Affordability Crisis: Unmasking California’s RHNA Process and Its Role in Gentrification

September 2, 2024

September 2, 2024

Affordability: An Income and Available Asset Gap Issue, Not a Supply Issue (Last week’s article revealed how state mandates became...

SM.a.r.t Column: Part 1: The Affordability Crisis: Unmasking California’s RHNA Process and Its Role in Gentrification

August 26, 2024

August 26, 2024

In the world of economic policy, good intentions often pave the way to unintended consequences. Nowhere is this more evident...

SM.a.r.t Column: They Want to Build a Wall

August 18, 2024

August 18, 2024

Every once in a while, a topic arises that we had previously written about but doesn’t seem to go away....

SM.a.r.t Column: Sharks vs. Batteries – Part 5 of 5

August 11, 2024

August 11, 2024

This is the last SMart article in an expanding  5 part series about our City’s power, water, and food prospects....

SM.a.r.t Column: Your Home’s First Battery Is in Your Car

August 4, 2024

August 4, 2024

This is the fourth in a series of SM.a.r.t articles about food, water, and energy issues in Santa Monica. You...

SM.a.r.t Column: Food Water and Energy Part 3 of 4

July 28, 2024

July 28, 2024

Our previous two S.M.a,r,t, articles talked about the seismic risks to the City from getting its three survival essentials: food,...