As a mom, my children are my world. Well, they're a huge part of my world. As much as I wish I could have them around while making conference calls, it wouldn't help me be an effective leader for my company, Inkwell. As a founder, I can expense a lot of things that are essential to my job--my personal assistant, travel, certain meals, technology. But I cannot expense my childcare. Why on earth is this?
There are ongoing debates about the necessity of childcare being a tax-deductible expense, many of these debates between men, with varying opinions and viewpoints. As a female entrepreneur, I recognize the unique issue that women are facing, and I'm here to say: it's not fair. Not only is it unfair, but it's holding women back who are leaders. We need women in leadership roles for many different reasons, but they shouldn't be held back from running the show in the workplace because they cannot afford to have someone run the show at home.
So why can't you expense childcare?
I posed this question to a tax attorney who deals with the finances of small businesses and individuals. Turns out, it's not that simple. The short answer is that childcare isn't deductible because it's a personal expense. However, I can expense my personal assistant to do just as her title suggests: personal work. She can book my travel and do business and personal related errands for me, and yet I can't expense a babysitter to stay with my kids while I go on that very same business trip. I can book my own travel, but I can't attend a meeting at the White House with a baby on my lap.
This wasn't an issue in the past for the primarily male CEOs who had wives at home to take care of the kids while they went on business trips. But in a two-person working family, who is supposed to watch the kids?
If you want to really get into the nitty-gritty of it, there are certain instances in which you can claim a Child and Dependent Care Credit on your federal tax return--but those instances come with a host of restrictions, and the amount of money you can claim is capped. According to the IRS, a business "expense" is one that is both ordinary and necessary. So, for the 30% of women running businesses, and the ones who are parents--what are they supposed to do? Is this not both ordinary and necessary? I think it is.
We have long known that the traditional 9-to-5 workplace wasn't made for women. It was made for a couple, 1950s style, in which one person works and the other stays at home. Over the years this outdated model has somewhat evolved; there are more innovations now than ever before--from private rooms for pumping breastmilk to varying childcare options. But there aren't enough. In fact, that's one of the biggest reasons why I founded Inkwell, my forward-thinking staffing and recruiting firm. Our company places powerful women in powerful jobs that allow them one key element: flexibility. But with expensive childcare not being a viable or "legitimate" business expense, it's stymying this progress and process.
Of course, this is not just a women's issue--it's an everyone issue. Increasingly, fathers are becoming more involved as caregivers, sometimes sharing this role fifty-fifty with mothers. It's also not just a CEO issue. As the workforce is becoming more flexible and contractor-based, more people could benefit from deducting childcare costs. Because in most cases you simply can't work if you have to take care of kids at the same time. Could there be a more legitimate business expense?
Right now, the women in our culture still predominantly handle childcare, so the inability to expense it does affect them more. Women are tremendous drivers of innovation and leadership, but if they're expected to do all of that while juggling confusing and expensive childcare options, it will (and does) affect workplaces and work quality everywhere. Women often "break even" with childcare: their salaries aren't worth making because they're paying that cost in childcare. The current Child and Dependent Care Credit says that if you make more than $50,000 a year, the maximum tax credit you can receive is $1,200, covering only one to two weeks of full-time childcare!
The numbers don't lie--and they determine a lot about women's choices. Too many women make the short-term (but sometimes necessary) financial decision to stop working because childcare costs more than they make. This stop-gap solution reduces women's future earning potential significantly. If families can't afford to employ quality, full-time childcare, it is often the women who are forced to make sacrifices--and both work and parenting suffer.