Child-care Costs

Denise Trowbridge

Child care. The cost just keeps rising.

According to the nonprofit Childcare Aware organization, the average cost - per child - for child care in Ohio in 2013 was $6,919, a number that represents 34 percent of the average annual income of a single mother, or 9 percent of a married couple's average annual income. It's an expense that has grown faster than wages and inflation for the past decade.

There are ways to take some of the sting out of the price tag, though. First, there is the federal dependent care tax credit. Then, there are child-care flexible spending accounts. You can generally only use one, and the benefits of each vary based on income.

The flexible spending account allows you to set aside up to $5,000 tax-free each year to pay for child-care costs. The money withheld is pre-tax dollars, meaning it is free from federal, state, Social Security and Medicare taxes.

The child-care tax credit reduces the federal taxes you owe, but does not reduce your state, Social Security or Medicare taxes. You can claim up to $3,000 per child per year in expenses, but the actual value of the tax credit varies based on your income.

"For most families, the flexible spending account is a better option, but requires more paperwork and it's use-it-or-lose-it," said Jill Gianola of Gianola Financial Planning in Upper Arlington.

Generally, the credit is more valuable the lower the family income. "The child-care tax credit is as low as 20 percent if your adjusted gross income is greater than $43,000 or as high as 35 percent if your (adjusted gross income) is $15,000 or lower," Gianola said.

Basically, that means for one child, the actual tax credit can range from $600 to $1,050, depending on your income. For two or more children, it can range from $1,200 to $2,100.

The math can get complicated, but if you can't figure out which one is best for you, there are handy calculators online. ( or

The general guideline is if you have one child and make $17,000 or less, go with the tax credit, Gianola said. If you have one child and make more than $17,000, go for the flexible spending account. If you have two children and make $40,000 or more, the flexible spending account is the better deal.

There are some rules, though. First, to qualify for either, both spouses in two-parent households have to earn income. Second, the children must be 13 or younger.

Should you opt for the flexible spending account, remember you have to use all the money within the time frame set by your plan, or you lose those dollars. And there's no doubling up. If you're married and you both work and have access to a dependent care flexible spending account, the family limit is $5,000, whether it's all in one plan or split between two.

As of 2013, for families earning $40,000 or less, Ohio enacted an income tax credit for child-care expenses. Families earning less than $20,000 earn a credit worth 100 percent of the qualifying child-care expenses claimed on their federal tax return. The credit is 25 percent for families earning $20,000 to $40,000. The state credit, though, will only reduce taxes owed and will not result in a refund.

Denise Trowbridge is a self-professed money geek who writes about personal finance, banking and insurance for The Columbus Dispatch, and