Government Childcare Funds

There are federal and state government funds available that can help families pay for the cost of child care. It’s no secret that quality child care can be expensive. Fortunately there are a variety of assistance programs for low-income and other eligible families. Below we will list some government funds, child care programs, subsidies, and other resources that can help cover/lower the cost of caring for your family.

  • Child Care and Development Fund– (CCDF) provides assistance to low-income families who need child care due to work, work-related training and/or attending school. In 2012, $5.2 billion was allocated to this fund. The program aims to  improve the quality of child care, and promotes coordination among early childhood development and after-school programs.
  • Flexible Spending Account– (FSA) is a special account you put money into that you use to pay for certain out-of-pocket health care costs. Since you don’t pay taxes on this money. you’ll save an amount equal to the taxes you would have paid on the money you set aside. How does this help: If your job offers an FSA, you can put aside up to $5,000, which is the family limit, in pre-tax dollars to pay for child care expenses. This fund could get as much as $2,000 in tax savings if your combined contributions reach the maximum.
  • State Assistance– Each state receives funds from the federal government for their state’s child care fee assistance program. Click here to find the contact information for your state. Many of the subsidies have strict income and age limit guidelines, however exceptions can be made for children with a disability. You can find your state’s child care subsidy website on this State by State Resource Map. See below for some examples of specific State assistance programs and grants that are available:
    • Washington: The Child Care Subsidy Program– helps families to pay for quality child care through either the Working Connections Child Care, or Seasonal Child Care.
    • Nebraska: Children’s Cabinet–  is a financial assistance program that can refer families to providers, help them apply for subsidies, and can even help families who want to pay a relative for care.
    • North Carolina: Smart Start is a public/private partnership with the goal of promoting high quality early care that is child-focused, family-friendly, and fair to providers. For years, Smart Start subsidy funds have been used to increase the quality of early child care and education in the state.
  • Head Start Programs– Comprehensive child development programs which serve children from birth to age 5, pregnant women, and their families. They are child-focused programs and have the overall goal of increasing the school readiness of young children in low-income families.
  • State Funded Pre-K– More states than ever are providing publicly funded preschool. Some states offer Pre-K programs at low or no cost to eligible families, while other states have made pre-K available to all families. Your local Child Care Resource and Referral agency (CCR&R) can tell you if your state funds pre-K for some or all families.
  • Military and Dod Families–  Child Care Aware® of America offers child care fee assistance to eligible members of the military and DoD. Eligibility requirements are determined by each branch of service or agency. Visit Child Care Aware® of America’s website to find out if your branch or agency is covered

Child Tax Credits

The first step you will want to take with your newborn child is to get a Social Security Number (SSN) when you get the birth certificate. Not only will this be the most convenient and efficient time to do this, but you will also need your child’s SSN when it comes time to file your taxes!

Claiming a Dependent

When you claim your child as a dependent on your taxes, you are granted an exemption of $4,050! You can claim your child as a dependent until they turn 19, so those savings can really add up. Alternatively, you can claim your child as a dependent until they are 24, as long as they enrolled as a full-time student.

Dependent Disability Exemption

If your child or relative is considered to be “permanently and totally” disabled, the age restriction for claiming them as a dependent does not apply. To be classified as permanently and totally disabled, the individual can’t engage in substantial gainful activity due to their disability, and a doctor must determine if their condition has lasted (or is expected to last) over a year or can lead to death.

$1,000 Child Tax Credit

For married couples filing jointly that make below $110,000 or for a single head of household that makes below $75,000, you can claim a tax credit of $1,000 per new child, regardless of how late in the year the baby is born! To claim this credit, make sure your child meets the requirements here.

Child Care Credit

If you have to put your child or children in child care in order to go to work, you can earn a tax credit ranging from $600 to $1,050 (for children under the age of 13). If you are paying for two or more children under the age of 13 to be in child care, the credit can range from $1,200 to $2,100! Find more information here.

Adoption Credit

If you have adopted a child, the IRS offers a tax credit to help you offset the cost of adoption. For 2017, the full value of the credit was $13,570. If you adopted a “special needs” child, you can claim the full credit even if the adoption costs were less than its total value.

Education Funds

You want your child to have the best chances at success in life, and a quality education plays a crucial role in your child’s overall success! The only problem is that education is expensive, and the costs can add up quickly. Luckily there are a number of funds out there to help you cover the cost of education, as well as different ways to save up for future needs! We’ve put together a list of helpful resources to help you get started:

The “529 Plan”

A 529 Plan is a savings plan specifically designed to help families set aside funds for future education. They are operated either by the state or an educational institution, and studies have shown that parents who use a 529 plan are significantly more successful at saving than those who don’t. Additionally, there are three types of 529 plan for you to choose from:

  • 529 Savings Plan: This is similar to a 401(k) or a Roth IRA, and your financial contributions are invested into things like mutual funds. 
  • 529 Prepaid Tuition Plan: This plan allows you to pay the cost of in-state college tuition in advance. If your child decides to go to school out of state or to a private university, the money from that plan can be transferred. In some states, however, the full amount can’t be transferred, so look at the rules in your state before setting up your plan.
  • Private 529 Plan: This plan will allow you to pre-pay the cost of tuition for participating colleges or universities at today’s prices. This will be particularly useful considering the constantly rising costs of tuition.

Coverdell Education Savings Account

This type of account allows parents to contribute up to $2,000 a year to the account, and that money will be used to cover the cost of future education. Additionally, the funds in the account can grow tax-free until they are withdrawn. If the funds in the account are used to cover the costs of college, their distribution will not be taxed either.

College savings with insurance

This option might be more appealing to parents who don’t want to use a 529 plan, as they are subject to market volatility to a certain degree. This setup combines a college savings plan with life insurance. The parent (or parents) sets aside a specific amount of money every year for a specified window of time, and during that time the parent receives life insurance coverage. The child can then use the money from that plan for college or to pursue other interests if they so choose.

American Opportunity Tax Credit

This tax credit, also referred to as the AOTC, applies to eligible students for the first four years of their higher education. You can receive a credit of up to $2,500 annually per student, and if the credit brings your taxes down to $0, you can have up to 40% of the remaining amount refunded to you.  

Military Scholarships

The Military Child Education Coalition provides educational resources for children of military families. Military families must relocate frequently, and this can cause significant disruption in the educational development of their children. The Military Child Education Coalition was created to help children of military families get the education they need in order to succeed in life, including a number of scholarships.

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