I remember while I was pregnant and on maternity leave I searched–increasingly desperately–for daycare options. I was faced with this completely gray area over and over…how much does daycare actually cost? When I Googled the term I came up with endless forum posts that did not apply to me at all. So I’m attempting to fix it with this post. I hope it proves useful for parents like me, trying to find daycare options. I’m going to start with a list of common questions and what I’ve figured out (so far) as the answer(s).

Why Do Daycare Costs Vary by Region?

I am going to share the costs for Northern California in an urban setting. Note that this is not San Francisco or Los Angeles costs, but I would definitely say these costs are at the high end. I have seen costs on various forums and Craigslist range dramatically–even within a single city. I’d be curious how close my amounts are to your local area’s costs.

Why do Daycare Costs Vary by Setting?

It has to do with licensing. The cheapest daycare option by far (and, I might argue, even cheaper than having a parent stay at home, depending on their income and region) is a friend, relative, or other parent watching your child in an unlicensed setting. That’s a lot of trust to place in someone, and because there is no outside agency monitoring, they are cheaper. This does not, however, exempt you from needing their social security number–when you fill out your taxes you will have to report the amount you paid (and they need to claim it as income).

A licensed home daycare is next cheapest; in our state they can have up to 6 non-infant children (ratio 1 caregiver to 6 children or 1:6), and if they are watching an infant this ratio drops to 4 children (1:4). Which, of course, makes it anecdotally 10 times harder to find someone to watch your infant (they effectively lose two paying daycare slots). Daycare centers are next most expensive, in part because they need to employ more staff to meet the ratios. The most expensive option is a nanny, of course.

What Tax Exemptions are Available?

I made the mistake of thinking we could claim all our daycare costs…sigh. One of the things I had to learn is that the IRS lets you claim $5,000. Period. They don’t care if there’s one child or ten children whether it’s claimed on your tax form or through a dependent care savings account with your employer. It’s $5,000 period. (Note: this is different from the child care CREDIT–I don’t know as much about that as we’ve never qualified.)

How do I Set Up a Dependent Care Savings Account?

If your employer offers this, check with their procedures for which forms to fill out. Do this within the first 30 days of having your baby if you are planning to take your infant into a care setting. I cannot emphasize this enough! To get the full $5,000 for 12 months, ask for $416.66 per month to be withheld from your paycheck. If you are paid biweekly, take $5,000 and divide by 26 paychecks for the correct amount; if paid weekly, $5,000 divided by 52 paychecks.

For your infant, it’s likely you’ll be needing only a partial year. You will want to claim more than $416.66 per month (for example, $5,000 divided by 7 months). This is where it becomes critical to know your cost of daycare, so that you are not leaving money on the table from your paycheck.

Drumroll please….

What is the Actual Cost of Daycare?

In our city, based upon my experience, you can expect to pay the following:*

  • Home-based, unlicensed daycare: up to $100-$150/week ($433.33-$650/month)
  • Home-based, licensed daycare: up to $135-$185/week ($585-$801.67/month)
  • Daycare center, infant: up to $305/week ($1,321.67/month)
  • Daycare center, toddler (not potty-trained): up to $265/week ($1,148.33/month)
  • Daycare center, preschooler (potty-trained): up to $240/week ($1,040/month)
  • Nanny: in our area, starting at $1,600/month; most cost $15/hour or $2,600/month (not including payroll taxes, etc.)

High-end Figures: Yes. Yes, these are the high-end figures for a daycare center. But I have found the variance to not be much from this for many places. Just on a quick scan, the infant full-time rates that I see at a center range from $1,100 to $1,450 in my area (the $1,450 I think is an outlier, so I didn’t include it in my list above).

Part-time: A note on part-time care…in general, in my area, you will find it difficult to locate part-time infant care in a daycare center. Most of them will charge a 5-day fee no matter what. This is due to the intense nature of infant care and the bonding they/you will want…much harder on a part-time schedule. For toddlers on up, it’s a lot easier to find part-time care–in my experience, the costs are not THAT much different. I would budget for full-time care, divided by the number of days you want for part-time, and then pocket the difference as budget savings.

Nannies: I have never engaged one, so I don’t know how the tax situation works. However, if we have another baby I am thinking of doing a nanny-share if I find one who is affordable enough, and probably only for the first year or so.

I hope this helps all those parents out there trying to figure out how much to budget.

*These figures are as of early 2015. Monthly costs for weekly fees calculated as weekly fee*52 weeks=X; X/12 months=monthly fee.