5 Things to Consider Before Choosing Summer Childcare

You can't put a price on memories.

Choosing summer childcare used to be easy: You would find a local teenager looking for a summer job, pay her in cash, and she watched the kids while you went to work.

Today, it’s a lot more complicated. There are many tax and financial implications to consider when evaluating summer childcare options. Although summer may seem far away, it’s coming up quickly, so now is the time to start taking action.

We spoke with Emily Boothroyd, a certified financial planner and mom, about the five issues that everyone should consider before arranging summer care.

Think Twice Before Paying Cash

It may seem like hiring a high school or college student and paying in cash is the simplest solution. Although paying cash for the occasional babysitting job is fine, regular care needs to be reported to the IRS once you’ve paid the same sitter $2,000 or more. (And with current babysitting rates, that will happen quickly).

It may seem silly, but you could be in trouble if you’re ever audited by the IRS and found to be employing someone but not documenting their pay, warns Boothroyd.

If you’re hiring a nanny to work in your home, you are responsible as the employer for providing things like Social Security and Medicare contributions, and tax withholdings. All of that means that the actual cost of having a nanny is much higher than just the hourly rate.

Take Advantage of the Dependent Care Flexible Spending Account

Some employers offer a flex spending account that allows you to set aside up to $5,000 in pre-tax money to be used to pay for childcare. This means that you can store up some extra money to pay for summer care. Plus, most day camps qualify.

However, you’ll want to be careful with this option, because funds in a dependent care flexible spending account must be used by the end of the tax year. In this case, it’s a matter of use it or lose it.

Understand the Childcare Tax Credit

Many people get excited about receiving this tax credit, which is designed to help cover the cost of childcare during the hours when parents are working, going to school, or even looking for work.

Most childcare programs qualify for this credit, and most families will see some sort of credit, even if it’s just for the care they pay for during the summer months.

While the tax credit can be significant for lower earners, it is phased out as your income rises. This means that, depending on your income level, you may see much less tax benefit than you anticipated. It’s also worth noting that you can’t get the credit on any money spent from your dependent care flexible spending account.

Plan for Some Financial Pitfalls

The summer months are full of stress for working parents. With school out, care can be less reliable, and kids do get sick and hurt, which can mean more time off for parents.

Boothroyd recommends saving some paid time off if possible or at least budgeting to cover unexpected days away from work during the summer.

Decide What’s Important to You

Summer vacation can bring up all the worries that working parents feel about balancing kids and career. While there’s a lot to consider about the financial implications of summer care, you can’t evaluate everything from a financial standpoint alone.

Who can put a price tag on the joy of exploring new locations with your kids or the delight on a child’s face when she’s attending a dream camp?

“You can’t put a price on memories,” Boothroyd says. “Pick something that will be the greatest benefit to you and your family. Make peace with it, don’t second guess it, and move forward. There are some quality of life things that we can’t do math on.

Join the Discussion

One Response to “5 Things to Consider Before Choosing Summer Childcare”

  1. maria rose randazzo

    The biggest not discussed problem is finding good reliable childcare. This hasn’t been addressed enough by anyone. Childcare should not be equivalent to a complete weekly salary of one wage earner which means one person is working to pay another to watch their children. Okay at certain ages, care is different, but school age children should have summer programs available so the parents can work during the summer programs. The USA is one of the few places that childcare is left with little options. When talk was made a few years back about extending the school year to a 12 month program, I was all for it. There were breaks in the 12 months but not like the 10 week break the school age children get yearly now. I believe it was the teacher’s union that protested this 12 month school years because of the way teachers are only required to work 180 days of the year and the cost of raising the salaries to compensate is too expensive for the municipalities that pay their salaries., passing the cost of childcare back to parents for the summer. Not every business needs a in-house childcare center but all business could support a local site to which their employees can bring their children without massive cost, especially during school breaks. With more households needing both parents working to survive, we need more and better childcare facilities here in USA