One thing to keep in mind is that you can't actually "choose" which mortgage to claim - if both properties qualify as your primary residence and second home, you're entitled to deduct the interest on both mortgages up to the applicable limits. You can't selectively ignore one to maximize the other. What you CAN do is make sure you're maximizing the deductible portions within the rules. Since your first mortgage ($550k) is grandfathered under the old $1M limit, you can deduct all the interest on that. For your new $1.3M mortgage, you'd be able to deduct interest on $750k of that loan amount. The key is making sure your total itemized deductions (including both mortgage interests, state taxes, charitable donations, etc.) exceed the standard deduction to make itemizing worthwhile. With mortgages totaling $1.85M, you'll likely have substantial interest payments that would justify itemizing.

Just to add one important consideration that hasn't been mentioned yet - make sure you understand the order of payments if you end up with a mortgage over the deduction limit. For your new $1.3M mortgage where only $750k qualifies for deductions, the IRS treats the deductible portion as being paid first throughout the year. So if you pay $91,000 in interest on that 7% mortgage ($1.3M × 7%), you'd be able to deduct interest on the first $750k of principal, which would be about $52,500 ($750k × 7%). The remaining $38,500 in interest payments wouldn't be deductible. Also, double-check that both properties will actually qualify as residences under IRS rules. The second home needs to have basic living accommodations (sleeping, cooking, and toilet facilities) and you need to use it personally for more than 14 days per year or 10% of the days it's rented out, whichever is greater. Since you mentioned using it 3 months per year, you should be fine on that front.

Hey Austin, I completely understand your stress about this situation. You're smart to be thinking about filing separately - that's definitely the safer route given your wife's tax history. One thing I'd add to the great advice already given: even if you file married filing separately this year, you and your wife can still work together to tackle her unfiled returns without it affecting your current tax liability. The IRS treats each spouse's tax obligations separately when you file MFS, so her past issues won't impact your clean record. From a practical standpoint, I'd suggest having an honest conversation with your wife about getting current with her taxes. The anxiety and uncertainty of having unfiled returns hanging over your heads will only get worse with time. Plus, as others mentioned, she might actually be owed refunds for some of those years. If she's willing to start the process, beginning with just the most recent year or two can make it feel less overwhelming. The IRS is generally more interested in getting people back into compliance than punishing them, especially when there's no indication of intentional fraud. Good luck with whatever you decide!

Austin, I feel for you being caught in this tough spot between protecting yourself financially and supporting your wife. One thing that might help ease into this conversation is focusing on the potential positives - as others mentioned, she could actually be owed refunds for some of those years, especially if she had taxes withheld from paychecks. You might also consider approaching it from the angle of financial planning for your future together. Having this uncertainty hanging over your marriage makes it harder to make long-term financial decisions with confidence. Framing it as "let's clear this up so we can plan our future together" might feel less threatening than focusing on the past mistakes. If she's really resistant to dealing with it all at once, maybe suggest just getting a wage and income transcript for the most recent year to see what her situation actually looks like? Sometimes the unknown feels scarier than the reality. The IRS website makes it pretty easy to request these transcripts online, and it would give you both concrete information to work with rather than just worrying about what might be wrong. Whatever approach you take, your instinct to file separately this year is definitely the right call to protect yourself while you figure out the bigger picture.

Just FYI for anyone else in this situation - if you're filing an extension, you don't actually NEED to use the online system. You can mail in Form 4868 or even have your tax preparer e-file the extension for you. Don't stress if you can't access the online system!

I'm glad to see you got some good solutions here! Just wanted to add that if you're still having trouble with identity verification, you can also try calling the IRS Taxpayer Assistance Center at 844-545-5640. They have specific protocols for helping people who can't access their online accounts due to identity verification issues. Another quick tip - if you remember roughly what year you filed (even if you're not 100% sure), you can try different years when the system asks for previous return information. Sometimes people forget they filed a simple return years ago, maybe when they were a student or had a part-time job. Also, don't forget that you might have received IRS correspondence in the mail over the years that could help jog your memory about when you last filed. Check any old mail or documents you might have kept - sometimes there are clues there about your tax filing history.

Has anyone had experience with how state taxes work with dual-status federal returns? I'm in a similar situation but also worried about state filing requirements. California seems particularly aggressive about taxing people with any connection to the state.

I went through a very similar situation last year and can confirm you'll need to file as dual-status. The IRS is pretty strict about this - if you change residency status during the tax year, dual-status filing is mandatory regardless of how simple your income situation might seem. For your capital gains, since you sold the stocks while physically present in the US (before May 2025), they'll be reported on the Form 1040 portion of your return, not the 1040NR. This is because the US has taxing rights on capital gains realized while you were a US resident for tax purposes. One thing to watch out for - make sure you're calculating your exact residency termination date correctly using the substantial presence test. It might not be exactly when you physically left in May, depending on your presence history in prior years. The IRS has specific rules about this that can affect which form certain income items go on. I ended up hiring a CPA who specializes in international tax because the dual-status rules are genuinely complex, but I know that's not always budget-friendly. If you do go the DIY route, make sure to attach a statement to your return explaining the dual-status filing and clearly marking which periods each form covers.

I went through this exact same confusion last year! After reading through all these comments, I want to add that if you're still unsure about your specific situation, you can also check your final paystub from December. It should show year-to-date totals for various deductions including health insurance premiums. Compare what's shown on your paystub for health insurance deductions with what's in Box 14 of your W-2. If they match, then your employer is correctly reporting your pre-tax premium contributions in Box 14. This is totally normal and legitimate - you're not getting "screwed over" as someone mentioned earlier. The key thing to remember is that pre-tax health insurance premiums actually SAVE you money on taxes because they reduce your taxable income. So whether it's in Box 12 or Box 14, as long as those premiums were deducted pre-tax from your paycheck, you're benefiting tax-wise.

This thread has been incredibly helpful! I'm a CPA and want to emphasize a few key points for anyone still confused about Box 14 reporting: 1. Box 14 is NOT an error box - it's specifically designed for additional information that doesn't have a dedicated spot elsewhere on the W-2. 2. Health insurance premiums in Box 14 typically indicate they were deducted pre-tax from your paycheck, which actually BENEFITS you by reducing your taxable income. 3. The location of the reporting (Box 12 vs Box 14) doesn't change your tax liability. What matters is whether the premiums were deducted pre-tax or post-tax. 4. If you want to verify everything is correct, compare your Box 1 wages (federal taxable income) with your gross pay from your final paystub. The difference should include your pre-tax deductions like health insurance. For the original poster - your employer is likely doing everything correctly. Box 14 reporting for insurance premiums is very common and completely legitimate. You're not losing money on your taxes because of this reporting method.