The 2001 Bush Tax Cuts doubled maximum of the Child Tax Credit to $1000 as well as making them partially refundable.
Established under the Taxpayer Relief Act of 1997, the child tax credit (CTC) was enacted to provide tax relief to parents of dependent children. The tax provisions goal was to help reduce the financial burden of families when they have children. When the tax credit was enacted the tax credit was non-refundable, which means the credit could only reduce the tax burden of families. 1
The Earned Income Tax Credit (EITC) is older, having been permanently established in 1978, it was original goal was to assist in encouraging people to obtain employment, reducing the unemployment rate, and reducing the welfare rolls. The credit was equal to 10% of the first $4,000 in earnings which meant the maximum credit amount was $400. The credit phased out between incomes of $4,000 and $8,000. 2
The maximum deduction for both the EITC and the CTC had been $500. Now, due to the Bush tax cuts, families became eligible for a refundable CTC equal to 15 percent of the family’s earnings above $10,000, until the credit reached the full $1,000 per child.
For more on the the CTC and EITC, click here and here.
For the full text of the bill, see here.
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