Thanks again. I just wrapped up with my tax. I ended up filing married separately for both state and federal. The mortgage interest was properly pro-rated between my wife and I using the 375k limitation. It's actually great. I ended up with around $400 more in total refund, but the best part is I now am very confident with the filing. It is straightforward, and defensible..
I had to pay tax penalty for my wife though. $5. A price I am willing to take...
