Author Topic: Cost of a new job  (Read 3901 times)

Credaholic

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Cost of a new job
« on: June 27, 2015, 12:02:20 AM »
I currently work as a contractor from home with my two kids. I have part time help from a mother's helper at a cost of $10,000 a year.  If I took an office job I would have to send both kids to full time daycare which in my area would be $30,000 a year. The Childcare tax credit would be about $1250 (capped out at $6000 deduction) and a flex spending account would save about another $1250 (capped at $5000) so a difference of $17,500.

Then there's the self employment tax I currently pay, and the health insurance I currently pay, and no 401K match. But there's also commuting costs, work wardrobe costs and lunch costs, and being away from my kids on a daily basis, and giving up a lot of the freedom in my day that I currently experience. So financially it seems like approximately $15K over what I currently earn is the magic number? Anything I'm missing?

deborah

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Re: Cost of a new job
« Reply #1 on: June 27, 2015, 12:07:06 AM »
After a few years you wouldn't have daycare, so that is only a temporary cost. Lunches should be free (make them and take them to work a la MMM).

lakemom

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Re: Cost of a new job
« Reply #2 on: June 27, 2015, 05:17:18 AM »
Is there a reason you want to start looking NOW?  Or are you just thinking aloud?  If expenses are currently working out, then I would keep doing the contract work at least until the oldest was in school full day and preferably when both were.  Then rather than 30k in daycare costs you would have $0 or perhaps a few thousand in after care costs. 

Personally to give up the time with my children and the freedom to set your own schedule I'd want to at the very least double my net take home on a monthly basis.  In other words, if you are currently banking 4k per month after all expenses I'd want to bank 7-8k a month from a work outside the home job.  But that's just me who values time with my kids as #1 above all else.  By 'bank' I mean including 401k, HSA, and flex not necessarily just what goes into the checking account each month.

forummm

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Re: Cost of a new job
« Reply #3 on: June 27, 2015, 07:47:47 AM »
Can you max a flex spending account AND take the max childcare deduction?

music lover

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Re: Cost of a new job
« Reply #4 on: June 27, 2015, 08:13:22 AM »
If I took an office job I would have to send both kids to full time daycare which in my area would be $30,000 a year.

$15,000 per kid per year?  Open a daycare.

Mrs.LC

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Re: Cost of a new job
« Reply #5 on: June 27, 2015, 08:29:14 AM »
Why are you debating this? How does the job change match your goals? Is it about the money or something else?

Just throwing some questions out there to consider.

Credaholic

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Re: Cost of a new job
« Reply #6 on: June 27, 2015, 08:39:49 AM »
Personally to give up the time with my children and the freedom to set your own schedule I'd want to at the very least double my net take home on a monthly basis.

I agree. I make good money now, and as I do this thought exercise I'm realizing I probably couldn't find a job outside the home to make this worth it to me. As my son nears 3 I'm more comfortable with the idea (he'll be going to half day Montessori next year regardless) and so maybe I need to revisit the idea in a couple years when my daughter is his age AND I would only pay for daycare for 1.

Why are you debating this? How does the job change match your goals? Is it about the money or something else?

I could use a reason to put deodorant on in the morning! ;) I'm happy, but am also starting to yearn something else. I don't love my current job, and my income has gone down a bit this year which prompted me thinking about this. I'm realizing my income could go down even more before this would be worth it to me though.

$15,000 per kid per year?  Open a daycare.

Yeah, it's shocking but that's the reality in-city in Seattle. I've actually ran some numbers on a daycare after a friend opened one! There are also 1-2 year waiting lists just to get into the daycares, so if I actually pulled the trigger on this right now I'd probably have to send them to one of the REALLY expensive ones until something opened up at a more reasonably priced one.

little_brown_dog

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Re: Cost of a new job
« Reply #7 on: June 27, 2015, 08:40:11 AM »
You list 3 benefits: no self employ tax, cheaper healthcare, 401K, vs. 5 drawbacks: higher daycare costs, commute, wardrobe/lunch expenses, lack of flexibility, and loss of time with kids. Three of the drawbacks could be serious hits to your quality of life, as very few people are genuinely okay with longer commutes, less scheduling flexibility, and less time with family. Seems to me like you might already know the answer to your own question for the time being...

forummm

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Re: Cost of a new job
« Reply #8 on: June 27, 2015, 12:59:15 PM »
Can you max a flex spending account AND take the max childcare deduction?

I'm just getting into this topic as I look around. I'm not certain, but it appears that you cannot take both. Here are some of the resources that seem to indicate that. I would love to hear more about this from someone who knows for sure. The first article is from 2009, so relevant tax law may have changed since then.
http://www.kiplinger.com/article/business/T020-C001-S001-flexible-spending-account-vs-dependent-care-credit.html
https://www.askallegiance.com/OnlineServices/FlexTaxCalculator/DependentCare/
https://www.fsafeds.com/forms/dcfsa_worksheet.pdf

Credaholic

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Re: Cost of a new job
« Reply #9 on: June 28, 2015, 10:40:47 PM »
Can you max a flex spending account AND take the max childcare deduction?

I'm just getting into this topic as I look around. I'm not certain, but it appears that you cannot take both. Here are some of the resources that seem to indicate that. I would love to hear more about this from someone who knows for sure. The first article is from 2009, so relevant tax law may have changed since then.
http://www.kiplinger.com/article/business/T020-C001-S001-flexible-spending-account-vs-dependent-care-credit.html
https://www.askallegiance.com/OnlineServices/FlexTaxCalculator/DependentCare/
https://www.fsafeds.com/forms/dcfsa_worksheet.pdf

I'm so disappointed to see how little of childcare can be written off. When I first started toying with this idea I assumed the full expense would be a deduction. Seeing the reality has totally derailed my thoughts on finding a new job. I don't know how people make it work!

Knapptyme

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Re: Cost of a new job
« Reply #10 on: June 28, 2015, 11:07:04 PM »
Can you max a flex spending account AND take the max childcare deduction?

I'm just getting into this topic as I look around. I'm not certain, but it appears that you cannot take both. Here are some of the resources that seem to indicate that. I would love to hear more about this from someone who knows for sure. The first article is from 2009, so relevant tax law may have changed since then.
http://www.kiplinger.com/article/business/T020-C001-S001-flexible-spending-account-vs-dependent-care-credit.html
https://www.askallegiance.com/OnlineServices/FlexTaxCalculator/DependentCare/
https://www.fsafeds.com/forms/dcfsa_worksheet.pdf

I'm so disappointed to see how little of childcare can be written off. When I first started toying with this idea I assumed the full expense would be a deduction. Seeing the reality has totally derailed my thoughts on finding a new job. I don't know how people make it work!

I have a little experience trying to work the system in question. The most frustrating part is that multiple children do no increase the dependent care flex spending contributions. There are a couple other workarounds if you employee multiple daycare providers, but that's a hassle in and of itself. Even the multiple income, separate flex spending options are limited to $5000 total. The only different strategy I have found valuable is with tax write offs from hiring a in-home nanny. There are other complications, but any taxes on wages paid reduce the AGI, and any expenses the nanny incurs (driving the family vehicle is a huge one) can become deductible.