Child Care, Work, and the Federal Income Tax

This article explores the federal income tax treatment of employment-related child care expenses. It takes both a theoretical and historical approach, examining the various ways in which the Code has dealt with child care in relation to conventional tax notions and values at play in the community at large. Part II outlines the history of the Code's various childcare provisions. It is a critical analysis whose purpose is to decide whether any of the provisions, which have existed, can be explained by a particular tax theory. Part III asks whether employment-related childcare expenses can be characterized as "business" or "personal" expenses. This question is asked in the hope that it can reveal what the proper tax treatment of employment-related childcare expenses should be. Would the exclusion of such costs be a refinement of the taxpayer's income or just another loophole? The issue of the imputed income of home production is taken up in part IV. Should a deduction for childcare and household services be allowed so as to provide tax neutrality between wage work and housework? Part V takes a second run through the history developed in part II. This time, however, the emphasis is sociological. I explore whether our reasons for preferring one child care provision over another, or over none at all, are more a product of underlying values regarding work and family than adherence to tax theory. Finally, in part VI, the author discusses what type of childcare provision he thinks the Code should have in light of what he has presented in the paper.