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Should Both Parents Work Outside The Home?

The Leave It To Beaver Family is now just a memory.  Many of us grew up in an era where it was the exception to the rule if both a mother and father in a family were working outside the home.  When a new baby arrives, the question of whether or not it makes sense for one spouse to stay home becomes paramount.  I will leave the social and moral aspects of this issue to experts on the family such as Dr. James Dobson.  This is not an easy decision, and I know that every family has its own unique set of circumstances to work through on this question.  This article will address the straightforward question, does it make financial sense for both parents to be working outside the home? 

1.  The Added Cost Of A Two Income Lifestyle

Before getting to the point of doing an analysis of the related tax issues and other expenses directly related to earning more money, let start by considering the additional cost of the two income lifestyle.

  • Transportation Costs – The cost of operating a second vehicle for commuting purposes.  Most likely it will cost about .50 per mile for your commute to work.  This figure includes fuel, maintenance, and depreciation of the vehicle as mileage is added.  This does not even account for other miscellaneous expenses such as parking fees and tolls. No, the cost of commuting is not deductible on your taxes.
  • Clothing – Depending on the type of work, there may be substantial ongoing expenses for uniforms or professional clothing.
  • Tools Of Your Trade –  This may be an additional laptop computer or other required tools or technology needed to perform your employment duties. 
  • Eating Away From Home – It is likely that there will be a substantial increase in eating at restaurants both during the work day as well as after work.  After all, there is no one home putting in the pot roast at 1 for dinner at 5.

2.  The Tax Advantages Of A Two Income Lifestyle

Without a doubt, the largest single expense that comes into play would be the cost of childcare.  If your children are older, this may not be a consideration.  Many parents don’t feel comfortable with the latch-key kid concept and will opt for some form of after-care for their school age children.

Individuals that pay for day care expenses for their children may be eligible for a federal tax credit of up to 35% percent of the cost of day care. To qualify for the child care credit, you must have a dependent child age 12 or younger. You calculate your tax credit on Form 2441 (PDF) and Instructions for Form 2441.

So, there is a little help here from Uncle Sam, but not likely a real game changer. 

3.  Financial Calculators That May Help You Make A Good Decision

Don’t forget that a second income also means additional income taxes.  This can get somewhat complicated especially when considering the possibility of more income moving you into a higher marginal tax bracket, state tax considerations, etc…  The good news is that there are financial calculators to crunch these numbers for you. 

Stay At Home Calculator from – Very comprehensive but does not appear to factor in the federal childcare tax credit.

Adding A Second Income Calculator From MSN – Appears to take tax rates into account but it is unclear whether or not the federal childcare tax credit is comprehensively included.

Ultimately, it may be well worth it to pay a consultation fee to discuss your entire financial picture with an accountant or financial planner.

4.  Working From Home, The Answer?

Starting your own home based business, telecommuting, or freelancing, may be the best answer.  Many companies actually encourage telecommuting and freelancing arrangements for employees that need to work from home.  In my recent article on Earning Money Working From Home there are dozens of ideas for your to consider.

Please provide your feedback and suggestions to other readers by using the comments section below.

Helping you make the most of God’s money!

James L. Paris
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