Syracuse, NY – U.S. Senator Kirsten Gillibrand (D-NY) announced new bipartisan legislation today that would change the federal tax system to help make child care more affordable and accessible for working parents and families. With a new report confirming that New York families pay the highest child care costs in the country, parents and advocates from across Upstate New York joined Gillibrand to discuss the new push to make the services more affordable.
“While middle class wages remain stagnant child care is now so expensive in this state, that it is rivaling the cost of sending our children to college,” said Senator Gillibrand. “For many families, both parents working, or a single mom going to work to provide for her family isn’t a choice. And no family should have to choose between earning a paycheck or staying home because they can’t afford the child care bills. Congress must come together and take this head-on, and we should start with these three proposals that have one very clear goal – to finally make child care affordable and accessible for our working families.”
In 2013, the estimated median household income for Onondaga County was $54,242 and $31,365 for Syracuse. New York was ranked the least affordable state in the nation for child care, according to a recent report by Child Care Aware. For many families, paying for child care represents a family’s largest monthly expense after housing.
In Central New York, there were over 56,000 families with children under six years old. For a year of child care in a day care center, families spends an average of $10,244 for an infant, up to $9,692 for a toddler 1.5-2 years, up to $9,133 for a toddler 3-5 years and up to $8,580 for a child age 6-12.
To help low-income and middle class families save more on quality child care, money that would go right back into the local economy, Senator Gillibrand is pushing to more than double the federal child care tax credit and make the credit refundable, allowing working parents to receive a maximum credit of $3,000 for one child, up from $1,050, and put more money back in their pockets. The Senator is also proposing allowing a family to deduct up to $14,00 of qualifying child care expenses, for two children, putting $3,500 back into their pockets. Additionally, Gillibrand will introduce legislation that would increase the amount of money families can contribute to a flexible spending account that is not subject to taxes families can use to pay for child care expenses – saving them hundreds of dollars.
Rachel Rossi Ricciardiello said, “Having our children enrolled in a safe & caring child care environment where they can create relationships, learn and grow is a top priority as a working parent! It allows our family to have the healthy balance that we need and want. Managing costs and finances is as important; increasing the federal tax credit and flexible spending dependent care amounts will help working families offset the significant and valuable cost of child care. Thank you Senator Gillibrand!”
Annabel Hine Otts, said, “I was forced out of my job last summer because I couldn’t negotiate the flexibility I needed after my baby was born, or afford the quality childcare she deserves during such crucial developmental months. Right now, the deck is stacked against working families, and this kind of legislation is essential to healthy families and a healthy economy. If I have to choose between doing what’s best for my family and working, I will always choose my family. But I hope there comes a time when that’s not a choice I’m forced to make.”
Stella Penizotto, Owner and President, Shining Stars Day Care Centers said, “Daycare providers find themselves in a daily struggle of improving & maintaining high quality child care at the same time keeping it affordable. Our industry is highly regulated and unfortunately it is a cost driver that is passed onto parents. I applaud Senator Gillibrand for proposing legislation designed to relieve some of that burden on working parents and am grateful that our representatives in Washington are joining together in the fight to make child care more affordable. Families across New York State need help now more than ever.”
Lori A. Boles, Executive Director, Child Care Solutions, Inc. said, “Investment in child care and family supports such as those proposed by Senator Gillibrand will have many economic and societal benefits for individuals, families, employers and our community. These measures improve affordability and access to safe, nurturing, high quality early care and learning programs which provide a strong foundation for children’s future success in school and the workforce.”
Expanding the Dependent and Child Care Tax Credit (DCTC)
Senator Gillibrand is working to more than double the Dependent and Child Care Tax Credit (DCTC). Currently, the child and dependent care tax credit is worth a maximum of 35% of child care expenses, up to $1,050 per child or $2,100 for two children. The credit applies to any child under the age of 13 and to disabled dependents of any age. The Right Start Child Care and Education Act would increase the maximum credit from $1,050 to $3,000 per child, by raising the percentage of the tax credit to 50% and doubling eligible expenses. The legislation also makes the tax credit fully refundable, allowing low-income families with no tax liability to receive the full benefit.
For example, under current law, a New York family with two children earning $30,000 a year, receives a credit of $1,620 ($810 per child). Under the Gillibrand proposal, which would make the tax credit refundable, the same family with two children could receive a maximum credit of $6,000 ($3,000 per child).
This legislation would also encourage more New York businesses to provide on-site child care services for their employees by providing employers with a tax deduction worth 35 percent of the cost of creating these facilities. Currently, employers can only deduct 25 percent of their costs.
Creating a New Child Care Tax Deduction
Today, Senator Gillibrand will introduce the Child Care Deduction, which would allow middle-class families to deduct the cost of child care from their taxes as a business expense. The legislation would create a new tax deduction, allowing families to deduct as much as $14,000 a year for child care expenses ($7,000 for one child).
Families would have the option of choosing an above-the-line deduction to help mitigate the high cost of child care. After all, child care expenses are necessary, non-optional costs to families with working parents that cannot forfeit needed wages.
For example, under current law, a family with two children earning $100,000 can receive a maximum credit of $1,200. Under the Gillibrand proposal, this family spending $14,000 a year on child care expenses could deduct the full amount, therefore, lowering their taxable income by $3,500.
Child and Dependent Care FSA Enhancement Act
Senator Gillibrand will introduce the Child and Dependent Care FSA Enhancement Act, which would increase the amount of money not subject to taxes that families can contribute to a flexible spending account used to pay for child care expenses. Gillibrand’s new legislation would increase the pre-tax contribution level from the current $5,000 to $7,500, saving New York families hundreds of dollars on child care.
For example, under current law a married couple making $80,000 will save $1,250 in Federal Taxes (25 percent of $5,000) if one parent contributes $5,000 to a dependent-care FSA account. Under Gillibrand’s new proposal, the same couple will save $1,875 in Federal Taxes (25 percent of $7,500) if one parent contributes $7,500 to a dependent-care FSA account.