The $400,000 Question: Can Iowa Employers Ease the Costs of Raising a Child?

The average annual cost to raise a child has climbed more than 20% over the past decade. Some estimates suggest getting a single child to the age of 18 will run a family nearly $400,000. 

You may be tempted to think Iowans catch a bit of a break, thanks to our generally lower cost of living. However, a 2024 SmartAsset study estimated that our states’ parents pay about $23,000/year to raise a little Iowan, bringing their all-in total to $414,000 a kid. 

The largest line item in the child-rearing budget is childcare. In Iowa, the same study approximated annual childcare expenses at more than $11,000/year. 

For working families, that’s a staggering out-of-pocket cost. It’s an expense that employers in Iowa and elsewhere are increasingly stepping in to help manage. Not only does this ease financial strain for their team members; it also helps attract and retain high-value talent. 

Creative Childcare Solutions Already at Work

If you are looking for ways to add or expand your own childcare benefits, below is a quick round-up of ideas from a range of company types and sizes. 

• Eastern Iowa’s Frontier Co-op, which started an informal childcare operation in 1976 to help employees from farming families, has since expanded to offer a subsidized onsite childcare program capable of supporting more than 100 kids from six weeks old to 12.
• Shapewear company Cakes Body offers its 30-person team a childcare subsidy program for kids under school age. Their benefit offers $36,000 annually at a breakdown of $3,000/month, meant to support two kids per family.
• Across the pond, start-up company, Apolitical, supports night-nanny services so the employees who care for infants overnight can return to work rested and productive. The company also offers new parents a budget for sleep training. 

One Big Beautiful Bill Act Provisions Could Lead to Even Better Benefits

Motivated employers may soon find new ways to expand their benefits for parents as they learn how to leverage various childcare provisions of the recently passed tax legislation, including the following.

Expanded employer-provided childcare credit. Small employers can claim up to $600,000, covering 50% of qualified childcare expenses. This could lead to things like new or enhanced onsite childcare, subsidies for local providers or backup care services. 

Higher limits for Dependent Care Assistance Programs (DCAP). Whereas households used to be limited to $5,000 annually, families now have up to $7,500 a year. Employers may leverage this increase to allow more pre-tax income for childcare, saving on payroll taxes. 

Trump Account savings vehicle. Parents and employers alike can contribute to these tax-deferred savings accounts. Children born over the next three years receive a $1,000 seed contribution. Offering automatic contributions to a child’s savings—which are excluded from an employee’s taxable wages, this may save everybody money while reinforcing a company’s family-friendly reputation.

Lightening the Load for Iowa’s Working Families

Whether you’re just starting to explore childcare benefits or looking to boost what you already offer, there are a multitude of potential solutions. From tax credits and savings vehicles to innovative subsidy programs, Iowa businesses have more tools than ever to support the parents on their teams. 

If you’d like help brainstorming what’s possible for your business, Bank Iowa would be happy to talk through ideas. Reach out to one of our team members today!