The scenario includes interest payments of 5 percent on a $400,000 mortgage, Fleming said. If the mortgage deduction is eliminated, the family's tax bill would increase 19 percent to $150,080 in 2013 from 2011, according to the analysis.

States such as Connecticut and Illinois have raised taxes this year, according to the Washington-based Tax Foundation. Hawaii and Oregon have the highest state income tax with rates as high as 11 percent.

The federal government is under pressure to come up with ways to reduce deficits and the national debt, or it may lose its AAA credit rating, Standard & Poor's said on April 18. The budget situation is causing some lawmakers to call for cuts in spending and others to advocate for tax increases, said Mark Robyn, economist for the Tax Foundation, a nonpartisan research group in Washington. "Politically, you're probably going to see some combination of the two," Robyn said.

Biggest Breaks

The biggest federal tax breaks for individuals include those for mortgage interest, charitable contributions, state and local taxes, incentives for retirement savings and the exclusion for employer-provided health care, said Clint Stretch, managing principal of tax policy at Deloitte Tax LLP in Washington. Each of them would be "politically pretty toxic" to eliminate or reduce, Stretch said.

Phasing out the mortgage interest deduction would increase federal revenue by $214.6 billion over the next 10 years, according to estimates from the Joint Committee on Taxation in a March report by the CBO. Curtailing deductions for charitable giving would raise an estimated $219 billion over the next decade, the CBO study said.

Other revenue-raising options include taxing interest earned on municipal bonds and reducing the cap on all contributions to 401(k) retirement plans to $14,850 annually and to $4,500 for individual retirement accounts, according to the CBO report. That compares with a maximum of as much as $22,000 this year for individual contributions to 401(k)s and $6,000 for IRAs.

Deficit Report

The bipartisan deficit commission suggested overhauling tax rates in a separate report in December that would set a top tax rate of 28 percent, down from the current 35 percent. That plan also would tax capital gains and dividends as ordinary income and convert the mortgage interest and charitable contribution deductions into limited credits.

"Individuals have a real problem," Stretch said of the varying proposals. "It's sort of like going through a tunnel when you're driving: You turn up your lights and you keep up your speed. You got to pay attention to it. You got to see where risks and opportunities are, but the worst thing you could probably do is to be paralyzed, to stop planning."


Less Spending Money