Opinion: The IRS failed to make an important tax change for working parents

Editor’s Note: Kara Alaimo, an associate professor in the Lawrence Herbert School of Communication at Hofstra University, writes about issues affecting women and social media. She was spokeswoman for international affairs in the Treasury Department during the Obama administration. The opinions expressed in this commentary are her own. View more opinion on CNN.

Last Friday, the IRS announced major changes to tax rules for next year. In 2023, workers will be able to contribute more of their earnings to retirement and health flexible spending accounts, which allow them to pay for medical expenses with pre-tax dollars. But the agency failed to make a change that would make a huge difference for working parents: making child care a legitimate, tax-deductible work expense.

Currently, if staffers go out and get dinner and drinks with clients after work, they can generally submit the tab as a legitimate work expense to the employer as long as it’s not, in the loosely defined explanation of the IRS, “lavish or extravagant” under the circumstances. But if a mom has to hire a babysitter in order to go to a client dinner, the babysitter’s fee is not tax-deductible. That’s because “personal, living, or family expenses are generally not deductible,” according to the IRS.

This is outrageous. With high inflation, parents are facing even more financial pressure these days, and for many families, every penny counts. So, when we pay for child care in order to work, it should be considered a tax-deductible expense. And if we hire child care to engage in work activities outside of our normal business hours – things like business trips or meals with colleagues – our employers should reimburse us for the expense, and it should be tax deductible for them.

The child and dependent tax credit allows many parents to write off up to half of their child care expenses, with a limit of $8,000 for one child or $16,000 for two or more children. (A credit reduces the amount of taxes a person or family owes, whereas a deduction lowers the amount of their income that is taxable.) But, for most parents, that credit wouldn’t be nearly enough. According to Child Care Aware of America, a non-profit that advocates for quality, affordable child care, the average price of child care in the United States was more than $10,000 in 2020, with great geographical variation. I, for one, pay far more than $10,000 per year for each of my children to go to preschool.

The IRS also allows employers to offer staffers dependent care flexible spending accounts, so up to $5,000 can be deducted from their paychecks each year and used to pay for child care expenses. This money is exempt from taxes – but the limit is laughable.

Hiring babysitters to go to work events adds an additional expense on top of the cost of a full-time nanny or child care center. And it is pricey. In my neighborhood in the Northeast, high school teenagers are now charging more per hour than I take home hourly (after taxes and benefit deductions) in my full-time job as a professor – and I have three graduate degrees and two decades of work experience. The Wall Street Journal recently reported that some teenagers are now charging $30 per hour to babysit – and getting it, because parents are so desperate to find help. So hiring child care to go to a work event is a major expense for parents – and one that should be reimbursed by their employers.

The blindness of the IRS and employers to these expenses is evidence of a gendered bias, according to writer and feminist activist Caroline Criado Perez. “The implicit bias is clear: expense codes are based on the assumption that the employee has a wife at home taking care of the home and the kids,” she writes in “Invisible Women: Data Bias in a World Designed for Men.” “This work doesn’t need paying for, because it’s women’s work, and women don’t get paid for it.”

But, in today’s world, the majority of parents of all genders work. It’s time for the IRS to update its antiquated rules and recognize child care as a legitimate, tax-deductible expense necessary for parents to work – and for employers to realize that, when they think they’re doing something nice for employees by inviting them to a steak dinner, they’re actually asking parents to incur a significant expense.