Get With The Program. If your employer offers a dependent-care assistance program, sign up. These plans allow you to direct as much as $5,000 of your salary each year into a special account for childcare expenses. Because your contribution is free from federal and Social Security taxes, and usually from state and local taxes as well, this can easily save you $2,000 or more a year. One caveat: To qualify, you must pay your caregiver on the books.
Let Uncle Sam Help. If your company doesn't have dependent-care assistance, be sure to claim the federal child and dependent-care tax credit that the government provides. The credit can save a middle-income family earning more than $28,000 a maximum of $480 for one child, and $960 for two or more. As with the dependent-care program, however, you must provide a taxpayer ID for your caregiver to claim this tax break.
Find Cheaper Alternatives. Family daycare is typically less expensive than a formal center; a foreign au pair is usually less expensive than a nanny already living in the U.S.
Share The Care. If you use a nanny, you can literally cut your costs in half by sharing your caregiver with another family. Or, if you know another working parent or two in your neighborhood whose part-time office hours complement yours, consider organizing a caregiving co-op, in which each parent cares for the kids for part of the day or on certain days of the week. "Not only can this arrangement save you a lot of money, but your kids also get the benefit of socializing with other children," says Susan Seitel, publisher of Work & Family Newsbriefs. "Everyone wins."