Once Sacred Tax Deductions Could Be Chopped

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As President Obama and Congress try to work out a deal to reduce the budget deficit, two tax deductions once thought sacred could be trimmed or cut.

If cut, it could hit you square in the pocketbook.

Lawmakers trying to avert the so-called "fiscal cliff" are looking for compromise. One long cherished tax deduction could go under the knife: the mortgage interest deduction, which  has helped boost the housing market and cushioned the tax blow on millions of families.

Experts say a budget deal could include caps structured to aim at high-income households - trimming or cutting the mortgage deduction for many of those taxpayers.

Kereakos Zuras, a former advisor to President George W. Bush, called it a dumb idea when the housing industry is already struggling:

"I think it's going to kill the real estate industry and it's going to hurt private individuals who have homes and its just going to create a bigger mess than we have now," Zuras said.

Figures from 2010, the most recent year available, showed the mortgage interest deduction helped families save $83 billion in taxes, according to the Reason Foundation.

Another deduction that could face the chopping block is charitable giving. American companies and individuals gave $298 billion last year, according to Giving USA.

Rick Dunham, who runs a company that advises charities, said trimming the deduction for charitable giving would cost charities more than $8 billion a year.

"The top three percent of all households in America provide about 45 percent of all charitable donations, which is about $100 billion, of individual charitable donations," he said.

"You're going to see big companies that contribute amounts of $10,000 or more are going to stop doing it, as well as individuals," Zuras said.

Surveys have shown that Americans want both deductions left alone and think Washington should fix the fiscal mess by cutting its own bloated budget.

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