# Childcare costs - Reduced, tax deductible or cashflow support



## _OkGo_ (9 Aug 2022)

@Purple , I've broken this off in a new thread because I think it got lost in the other thread.






						Make mortgage interest payments and childcare costs tax deductible while at the same time increasing property tax on PPR's
					

There is a serious flaw in the conversation about wealth, what it is and how we tax it.  Income is not wealth, in the context of housing it is what we use to acquire someone else's wealth (by paying off a mortgage) or to access someone else's wealth (by paying rent).  Here's an example of two...



					www.askaboutmoney.com
				





Purple said:


> Married couple with 2 kids in primary school and a mortgage.
> 
> Joint income €130,000
> Income tax, USC & PRSI €40,000
> ...



We are one of these families with a high income and childcare costs. For now its manageable because its only one child but when the second starts in childcare, the cost of childcare will easily exceed our mortgage payments and really eat into our disposable income for the next 4/5 years. We have made a big effort to fund pensions and overpay the mortgage so that we can manage our own cashflow when this happens so we'll be fine

While we would obviously benefit from reduced childcare costs, I don't think they should be made tax deductible. That is probably too much of a benefit for a select few and would possibly result in costs climbing further anyway.

The real issue I see is that childcare is a major cashflow headache for most families, even the high earners. I would much prefer to see a system in place to help parents manage the cashflow whereby you can choose to pay 50, 60, 70% of the monthly cost and then continue this rate of payment after childcare has finished, e.g. stretch 4/5 years cost over 8/10 years

The major advantage to this as I see it is that it can keep both parents working and funding pensions. I think it is crazy that in a household with a €50/60k and a €100k salaries, they would have similar net incomes after accounting for joint assessment and no cost of childcare. But what many don't see is that there are unseen "costs" to doing this such as missing out on pension contributions.

From a national level, I also think it is crazy that well educated and skilled people are leaving the workforce for a few years because of the financial burden for those 3/4 years. The decision to raise your own children should be made for family reasons, not for financial reasons.


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## Bow tie (9 Aug 2022)

_OkGo_ said:


> We are one of these families with a high income and childcare costs. For now its manageable because its only one child but when the second starts in childcare, the cost of childcare will easily exceed our mortgage payments and really eat into our disposable income for the next 4/5 years.


Creche for more than 1 (even 1) can be so punitive, it can be worth opting out of the workforce for a short time. Parental leave is not used enough in this country- one person take the first 26 weeks on top of maternity leave, then the other parent the second- while not losing your job. It can be a super way to cope with the first year or so. 
However, if you cannot afford it, it becomes moot. Perhaps the state should pay a very small supplement to parents staying at home- rather than hand to creches, make 26 weeks parental leave paid each? The benefit here would also be to normalise it, and for the person- they don't have to try to restart their career after leaving entirely.

Additionally, I think we should utilize the school system (buildings, processes, people) and bring in a 'reception' year at age 3-4, that would solve another year. All in all, it is a mad time, but it does pass.


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## Purple (9 Aug 2022)

_OkGo_ said:


> The real issue I see is that childcare is a major cashflow headache for most families, even the high earners. I would much prefer to see a system in place to help parents manage the cashflow whereby you can choose to pay 50, 60, 70% of the monthly cost and then continue this rate of payment after childcare has finished, e.g. stretch 4/5 years cost over 8/10 years


Why is it only a cost for 4/5 years? Most people need after school care of some sort for their children right through primary school. 


Bow tie said:


> Parental leave is not used enough in this country- one person take the first 26 weeks on top of maternity leave, then the other parent the second- while not losing your job. It can be a super way to cope with the first year or so.


Parental leave is fine if you are in a State job or in a large organisation but for people who have key roles in a small business it's just not an option. 


Bow tie said:


> Additionally, I think we should utilize the school system (buildings, processes, people)


The French have a system where pre and after school care is provided in the Schools, utilising their insurance etc. That should be looked at here.


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## _OkGo_ (9 Aug 2022)

Purple said:


> Why is it only a cost for 4/5 years? Most people need after school care of some sort for their children right through primary school.


4/5 years of peak cost where you might be paying full costs for 2 children. Beyond that, afterschool or half day costs while still significant would be a lot less and more manageable. In our specific case, we will probably have ~3 years where we are paying full costs for 2 children

But that is the point I'm trying to make. Instead of having to pay ~€2k/m for 3/4 years followed by a gradual decline into afterschool rates. I would much rather pay €1400 continuously so that I underpay now and overpay later but at least it is a constant.

For those families debating whether dropping one income is justified or not, having €600/700 more cashflow per month would take some of the financial pressure off the decision and then at least it is purely a "what's best for the family" decision


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## Bow tie (9 Aug 2022)

_OkGo_ said:


> For those families debating whether dropping one income is justified or not, having €600/700 more cashflow per month would take some of the financial pressure off the decision and then at least it is purely a "what's best for the family" decision


Paid parental leave would provide this, not pump up prices in the sector and not leave you paying a childcare bill over an extended period.
I know it may seem sensible now, but you cannot tell what the future will hold and forwarding debt in a student-loan style manner would be a disaster.


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## Bow tie (9 Aug 2022)

Purple said:


> Parental leave is fine if you are in a State job or in a large organisation but for people who have key roles in a small business it's just not an option.


And that shouldn't be the case. Enabling it for all has the added benefit of providing additional short term employment opportunities across the board.


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## T McGibney (9 Aug 2022)

Bow tie said:


> And that shouldn't be the case. Enabling it for all has the added benefit of providing additional short term employment opportunities across the board.


What are you supposed to do if you run a small business? Disappear and let it go to the wall?


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## Bow tie (9 Aug 2022)

T McGibney said:


> What are you supposed to do if you run a small business? Disappear and let it go to the wall?


Not suggesting that at all. 
I'm suggesting that you would bring someone in in a temporary employment situation for the time it was more financially viable for you to stay at home. Even small businesses should be thinking of long term succession planning, illness, risk etc.


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## T McGibney (9 Aug 2022)

Bow tie said:


> I'm suggesting that you would *bring someone in in a temporary employment situation* for the time it was more financially viable for you to stay at home. Even small businesses should be thinking of long term succession planning, illness, risk etc.


(bangs head against wall)


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## _OkGo_ (9 Aug 2022)

Bow tie said:


> Paid parental leave would provide this


I don't think parental leave solves the problem. It can help manage the first year as you have suggested but after that once your child enters childcare, you can't just take them out without the risk of losing your spot. You would be in a far worse situation if you lost your spot for the sake of those 6 months

Lots of people think that they will take child #1 out while they are on maternity leave for child #2 and save the cost of childcare. But what they often realize too late is that there is no guarantee that a spot for either child will be available when both require it


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## Bow tie (9 Aug 2022)

T McGibney said:


> (bangs head against wall)


OK; if you are completely indispensible do you have any plans for risk mitigation in any of the other circumstances mentioned.


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## Purple (9 Aug 2022)

Bow tie said:


> And that shouldn't be the case. Enabling it for all has the added benefit of providing additional short term employment opportunities across the board.


And no child should go hungry and there should be world peace. In the real world of tight margins and a lack of skilled labour that's just not possible.


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## Bow tie (9 Aug 2022)

_OkGo_ said:


> I don't think parental leave solves the problem. It can help manage the first year as you have suggested but after that once your child enters childcare, you can't just take them out without the risk of losing your spot. You would be in a far worse situation if you lost your spot for the sake of those 6 months
> 
> Lots of people think that they will take child #1 out while they are on maternity leave for child #2 and save the cost of childcare. But what they often realize too late is that there is no guarantee that a spot for either child will be available when both require it


Correct, and I forgot the whole 'spot' problem. Do you still have to pay a retainer to keep the place or how does it work now?

Gives even more reason for a public, school aligned system.


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## Bow tie (9 Aug 2022)

Purple said:


> And no child should go hungry and there should be world peace. In the real world of tight margins and a lack of skilled labour that's just not possible.


Stop trying to play the poster.


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## Purple (9 Aug 2022)

Bow tie said:


> OK; if you are completely indispensible do you have any plans for risk mitigation in any of the other circumstances mentioned.


In a small business plenty of people are indispensable over a period of 3-6 months. Especially if they are part of the team building the business. If a key person is hit by the proverbial bus the business runs an increased risk of failing.


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## Purple (9 Aug 2022)

Bow tie said:


> Stop trying to play the poster.


Eh?


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## T McGibney (9 Aug 2022)

Bow tie said:


> OK; if you are completely indispensible do you have any plans for risk mitigation in any of the other circumstances mentioned.


Is that question directed at me personally? If so, why? My days of raising small children are long over.


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## Bow tie (9 Aug 2022)

T McGibney said:


> Is that question directed at me personally? If so, why? My days of raising small children are long over.


It was, but OK if not relevant to you now.


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## T McGibney (9 Aug 2022)

Bow tie said:


> It was, but OK if not relevant to you now.


You have no business posing such questions to me on a public forum like this, especially as you are anonymous and I am not, and as I had neither indicated nor confirmed that I had a vested interest in the subject being discussed.


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## Bow tie (9 Aug 2022)

T McGibney said:


> You have no business posing such questions to me on a public forum like this, especially as you are anonymous and I am not, and as I had neither indicated nor confirmed that I had a vested interest in the subject being discussed.


Sincere apologies there was absolutely no intention to offend and the question was meant in general terms.
Once again, apologies.


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## NoRegretsCoyote (9 Aug 2022)

It's quite simple.

You just need big state subsidies for childcare. A little means tested, but not too much. Say everyone pays between 30% and 50% of childcare costs out of pocket depending on income.

The state spends money on much worse!


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## Purple (10 Aug 2022)

NoRegretsCoyote said:


> It's quite simple.
> 
> You just need big state subsidies for childcare. A little means tested, but not too much. Say everyone pays between 30% and 50% of childcare costs out of pocket depending on income.
> 
> The state spends money on much worse!


Making it tax deductible would give about the same result but without any additional State bureaucracy. We're falling over ourselves with State bodies and State funded Charities distributing money but distributing it net of their costs and those costs are huge. A better managed taxation system with refundable tax credits would be a far more efficient way of doing things.


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