New Jersey childcare cost calculator

What the calculator works out

Four things, in order: the gross cost of care for a year, what a dependent care FSA takes off it, the net cost that remains, and what that net cost is as a share of one income.

The last of those is the calculation many households actually make when one parent is deciding whether to stay in work, and it is the one this page treats most carefully, because it is incomplete on purpose and the incompleteness runs in one direction.

The weeks field matters more than people expect. Fifty weeks is the default, not fifty-two, because most centres close for holidays and most families take some leave. But a centre that bills a flat annual fee in twelve equal instalments charges for closure weeks anyway. Read the contract: if you pay for fifty-two, enter fifty-two.

A worked example at the default figures

The tool opens on $280 a week for one child, 50 weeks of care, a $42,000 take-home income for the lower earner, $5,000 of dependent care FSA, and a 22% marginal tax rate.

• Gross cost: $280 times 1 child times 50 weeks is $14,000 a year, about $1,167 a month.
• FSA saving: $5,000 run through the FSA at a 22% marginal rate is $1,100.
• Net cost: $14,000 minus $1,100 is $12,900.
• Share of the lower income: $12,900 against $42,000 is 31%.
• Left from that income: $29,100.

Add a second child at the same weekly rate and the gross doubles to $28,000. The FSA does not double: the amount you can run through it is capped in statute, so the saving stays at $1,100 while the cost rises by $14,000. The net cost becomes $26,900, which is 64% of the same income and leaves $15,100. This is the arithmetic behind the familiar observation that a second child in full-time care changes the decision far more than the first one did.

The FSA field is capped by the tool at the gross cost, since you cannot reimburse more than you spent, and the saving is simply the amount used multiplied by the marginal rate you enter. Use your actual marginal rate rather than your average one, because the FSA reduces the last dollars of your income rather than the first.

Why is the comparison against one income incomplete?

Because leaving work costs more than a salary, and this page only subtracts one.

The tool compares net childcare against the lower earner's take-home pay, which is the comparison people make in their heads. Framed that way, a job that nets $42,000 against $12,900 of care looks comfortable, and a job that nets $30,000 against two children in care looks like it is losing money. But at least four things sit outside that arithmetic, and all of them favour staying in work:

• Retirement contributions stop. Both your own and any employer match, which is compensation you simply do not receive. Years out are also years not compounding, and the investing section covers what that costs over a working life.
• Employer health cover stops. If the household then buys cover on the other spouse's plan or on an exchange, the premium difference is a real cost that never appears in this calculation.
• Earnings do not resume where they stopped. A career break usually depresses pay for years after a return, not just during the break. The gap does not close on the day you go back.
• Social Security is computed from a lifetime earnings record. Zero years count as zeros in that record.

And childcare is temporary in a way that a career is not. The expensive years are few. A household that compares one year of care against one year of salary is comparing a cost that ends against income that compounds. Treat the share-of-income figure as one input, and be explicit about the four items above before deciding on it.

None of that is an argument that everyone should stay in work. Some households are better off with a parent at home for reasons that have nothing to do with money, and some jobs genuinely do not cover the cost of the care they require. It is an argument for putting the full cost on both sides of the comparison rather than one.

The FSA and the credit cannot both cover the same expense

Two federal mechanisms exist for childcare costs, and they interact.

A dependent care FSA is an employer benefit funded by pre-tax salary deferral. It reduces the income you are taxed on, so what it is worth to you is the amount you use multiplied by your marginal rate. That is exactly what the tool computes: at 22%, $5,000 saves $1,100. At a lower marginal rate the same election saves less.

The Child and Dependent Care Credit is a tax credit claimed on your return against qualifying expenses, subject to its own limits and to a percentage that depends on income. IRS Publication 503 sets out who qualifies, what counts as a qualifying expense, and what the current limits are.

The rule that catches people is that you cannot claim both against the same expenses. Expenses reimbursed through an FSA are excluded from the amount you can use for the credit. Which route is worth more depends on your marginal rate, your income and how much care you pay for, and for some households a combination is best. This page does not model the credit at all, and it does not tell you which to choose. Read Publication 503, or ask a preparer, before making the election.

Two further warnings about the FSA. It is use-it-or-lose-it: elect more than you will actually spend and the excess is generally forfeited, so a household whose care arrangements might change mid-year should elect conservatively. And the contribution limit is set in statute and has changed, so do not carry a number forward from an old article. The $5,000 sitting in the tool's default is a placeholder, not a limit we publish. Check the current maximum against the IRS material linked below and against your employer's plan documents, which may set a lower limit than the statute allows.

Common mistakes with a childcare budget

• Using a toddler rate for an infant. Infant care costs more almost everywhere, because required staff-to-child ratios are tighter. Rates usually fall as a child ages, so a budget built on today's rate is pessimistic for later years and a budget built on a preschool rate is badly optimistic for a newborn.
• Entering 52 weeks when you pay for 50, or the reverse. Check whether the contract bills for closure weeks and holidays.
• Forgetting everything that is not tuition. Registration and waiting-list fees, deposits, supplies, nappies, meals, field trips and annual rate increases are all real and none are in the weekly figure.
• Ignoring late-pickup penalties. Many centres charge per minute, and the amounts are not trivial for a parent with an unpredictable commute.
• Electing an FSA amount you will not spend. Use-it-or-lose-it means the excess is generally forfeited.
• Assuming the FSA and the credit stack on the same expenses. They do not, and assuming they do overstates the help by whichever one you were not entitled to claim twice.
• Budgeting for one child and adding a second later. The FSA does not scale with children. The second child adds its full cost.
• Comparing care against gross salary. The tool asks for take-home for a reason. Compare net against net.

What this calculator does not include

• The Child and Dependent Care Credit. Not modelled, and it cannot be claimed against expenses an FSA already reimbursed.
• State childcare subsidies and sliding-scale assistance. Most states operate them and eligibility rules vary. ChildCare.gov is the place to start looking.
• Employer benefits other than the FSA, including on-site care, backup care and direct subsidies.
• Sibling and multi-child discounts. Common at centres, and the tool applies one flat weekly rate per child.
• The cost of leaving work. Retirement contributions, employer health cover and future earnings, as set out above.
• Any published rate of ours. We publish no childcare prices. The weekly figure is one you have to get from local providers, and quotes differ enormously between centre care, a family childcare home and a nanny share.
• How the cost changes as a child ages, or the point at which school changes the picture and after-school care replaces full-time care.

Where we hold no data, we ask you for the number rather than inventing one. See our methodology for how that principle is applied across the tools.

What should you check before committing to a place?

• Get written weekly rates for your child's actual age group, not the centre's headline rate
• Ask how many weeks a year are billed, and whether closures are charged
• Ask for the full fee schedule, including registration, deposits, supplies and late pickup
• Ask what notice period applies and what the annual increase has been for the last three years
• Check your employer's dependent care FSA limit and deadline before the election window closes
• Read IRS Publication 503 before choosing between the FSA and the credit
• Check state and local subsidy eligibility, which many households assume they fail without checking
• Put retirement contributions and health cover on the page before comparing against one income

Once the annual figure is stable, it belongs in the household budget rather than in a separate mental category, because for the years it runs it is often the second-largest line after housing. Put it beside the rest in the cost of living calculator, and read the wider family finance guides for how households usually absorb it.

This page is arithmetic on your own figures and a description of how two federal mechanisms interact. It is not tax advice, and it is not a recommendation about work, care or family arrangements. See the disclaimer.