Biden’s tax plan could save some families nearly $ 15,000 on childcare annually
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Low- and middle-income families could benefit from extensive childcare support under President Biden’s tax plan.
The $ 1.8 trillion spending and tax credit plan announced by Biden on Wednesday night would spend $ 225 billion over a decade on quality childcare for children under 5, ensuring families only have a portion of theirs Total income pay childcare.
The plan can save the average American family with young children $ 14,800 per year in childcare.
Low-income families would pay all of their childcare expenses, and those earning 1.5 times their median national income would spend no more than 7% of their annual income on childcare services. Parents have a range of childcare options to choose from under the plan.
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“I like the suggestion because it tries to look at a family’s entire budget,” said Elaine Maag, a research fellow at the Urban-Brookings Tax Policy Center. “Instead of saying that childcare will cost $ 10,000 a year or $ 2,000 a year, that portion of your income should go towards childcare.”
The proposal, which would be paid for through tax hikes for the richest Americans, would also include funding childcare workers to invest in the workforce, implying a minimum wage of $ 15 an hour for workers in the industry.
Why would it help
Many American families, especially those with lower incomes, spend a large portion of their income on childcare for children who are out of school, said Aaron Sojourner, an economist at the University of Minnesota.
The lowest-income families can spend about a third of their income on childcare, according to Sojourner, and even middle-class families spend about 14%.
“A 7% cap would be a huge benefit for families when they really have problems, and a huge investment in the well-being of children and families,” he said, adding that the US is currently spending a lot more on children once they do Having reached elementary school but having very little about early childhood.
“You are seeing these huge gaps between children from low-income families and high-income families opening in terms of their development, skills and capacities in the first five years of their lives,” said Sojourner.
Investing in high-quality early childhood care would also benefit parents – and women to a large extent – who, with this support, would be better able to return to work or stay with the workforce.
This is particularly important in light of the coronavirus pandemic, which has affected industries that mainly employed women and people of color. With schools closed due to Covid, many women stayed home to look after the children instead of returning to work after the economy reopened.
What other childcare is included in the bill
The bill includes additional childcare provisions, including childcare services for students, a free universal preschool for all 3- and 4-year-olds, and an expansion of certain tax credits.
The expanded child tax credit would be extended through 2025, and the temporary child and care tax credit from the U.S. rescue plan would be permanent, giving families a tax credit for up to half of their skilled childcare expenses, such as childcare expenses. Time care, after school or summer care for children under 13 years of age.
A 7% cap would be a great benefit for families when they really have problems and a great investment in the wellbeing of children and families
Economist, University of Minnesota
Credit is up to $ 4,000 for families with one child or $ 8,000 for two or more children. Families earning less than $ 125,000 per year will receive the full 50% reimbursement, while families earning between $ 125,000 and $ 400,000 per year will receive a partial credit.
How it could work
It is not clear how the childcare program will be run and the plan is likely to change before it is agreed by lawmakers.
It could potentially be implemented as a tax program, like other loans families get when they submit. It could also be managed like housing programs, where the government pays a portion of the expenses based on a family’s income and needs.
A spending program would probably be of better help to families, according to Maag.
“We want childcare benefits to reach families when they have to pay for childcare,” she said. “Tax benefits are generally obtained when you file your taxes, which can be many months later.”
In addition, a spending program would give families more flexibility to update the government as their situation changes, e.g. B. if they have another child or become a single parent.
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