Child Care Costs Are Skyrocketing–Here's How to Curb Some of Those Charges

Rising prices for commodities like bananas and used cars are getting plenty of media attention, but one larger and more serious problem is the skyrocketing cost of child care across the United States in 2025.

For starters, the cost of child care exceeds the cost of a public collegiate degree in 38 states, according to the Economic Policy Institute (EPI).

Child care costs do vary from state to state, ranging from as low as $572 per month in Mississippi to as high as $2,363 per month in Washington, D.C., for a household with one infant, the EPI reported.

The EPI report also noted that child care is considered affordable if it costs no more than 7 percent of a family’s income, citing U.S. Department of Health and Human Services figures. But current child care costs are soaring well above that level.

“Child care is unaffordable for working families everywhere in the country, and it’s even more unattainable for minimum wage workers and the very workers that administer child care,” said Katherine deCourcy, EPI research assistant, in a statement.

Private-sector child care experts agree, noting that increased competition, which is normally a lever to keep services up and prices down, isn’t enough to stem the rising tide.

“The state of the U.S. child care market is extremely competitive. Costs are rising dramatically due to demand and a lack of workforce,” Stephanie Fornaro, founder of Hello, Nanny, a boutique in-home care services company, told NTD. “Many care workers have left or are sitting out of the industry due to a lack of compensation or legal pay.”

Multiple Paths to Child Care Costs

“U.S. heads of household who hire someone to care for a child (under age 13) or a qualifying dependent, and who meets the work-related test (meaning the care is needed because both parents are working, looking for work, or are full-time students), may qualify for two key tax breaks,” Fornaro said.

Dependent Care Accounts (Flexible Spending Account, or FSA)

This option allows families to pay for child care expenses using pre-tax dollars. “Starting in 2026, the annual contribution limit will increase from $5,000 to $7,500 per family,” Fornaro said. Depending on your marginal tax rate, maximizing FSA contributions could save you up to $3,000 in federal taxes, up from $2,000 in 2025. Additional savings may apply in states with income taxes.

Families can also claim a tax credit for care-related expenses when filing their federal income tax return (IRS Form 2441). “The expense limits are $3,000 for one dependent and $6,000 for two or more dependents,” Fornaro said. The credit ranges from 20 to 50 percent of eligible expenses, depending on adjusted gross income. That translates to $600–$1,500 annually for one-child households and $1,200–$3,000 for families with two children.

Thirty states also offer additional tax credits or deductions to offset household employer costs.

Employers Should Get Into the Act

U.S. companies can also help stem the tide of surging child care costs, particularly with paid leave policies.

“Paid parental and medical leave is not just a family issue, but a major economic concern,” Deborah Hanus, working mom and CEO of Sparrow, an employee paid leave services manager, told NTD. “Without access to paid leave and affordable child care, one parent (most often the mother) is forced to leave the workforce, perpetuating an ongoing talent gap that the U.S. economy simply cannot afford.”

Paid leave policies grant women the time they need to care for their families without sacrificing their careers, leading to enormous economic implications. “States with leave policies in place see a 20% reduction in the number of women leaving their jobs in the year after giving birth,” Hanus said. “Some estimates suggest that implementing family-friendly policies like paid leave could boost the country’s GDP by as much as $1 trillion.”

Hanus said that, for far too long, paid leave has been treated as a partisan bargaining chip, readily sacrificed in budget negotiations. “It’s time we reframe it as the bipartisan economic solution it truly is,” she noted. “State governments have taken the necessary steps to legislate paid leave, but we need federal leadership to give Americans what they’re asking for. A national paid leave policy is what the economy needs in order to thrive in the years to come.”

Advocates often call for national paid leave programs and direct support for child care facilities. Yet, these measures have consistently faced years of political gridlock. Opponents argue that broad federal mandates could burden employers or raise taxes, while supporters counter that the long-term economic gains outweigh the costs.

That tension helps explain why the United States still lacks a national paid leave policy, despite polls showing strong public support. Recent history shows that U.S. lawmakers disagree over funding models, the scope of benefits, and whether such programs should be managed federally or left to states.

The Trump administration has pursued a different path, favoring market-driven and private-sector solutions over direct spending or price controls. Its policies have focused on tax breaks, expanded savings accounts, and employer incentives. Recent adjustments have strengthened the Child and Dependent Care Tax Credit and the Employer-Provided Child Care Tax Credit, while also expanding Dependent Care Assistance Plans, according to policy analysts.

One example of federal action came in 2019, when Trump signed the National Defense Authorization Act, granting federal employees 12 weeks of paid parental leave. That measure left private-sector workers as the next frontier in the parental leave debate.

With costs climbing well beyond affordability thresholds, families are looking for help from every angle, including tax relief, employer initiatives, and government policy. The solutions vary, from direct federal support to market-driven tax incentives, and the debate over which path is most sustainable shows no signs of cooling.

For now, parents are left to piece together strategies from what’s available, balancing short-term relief from tax credits and FSAs with the long-term push for broader reform.