I REALLY appreciate the guidance on this topic. Extremely helpful.

If I can add one additional twist to the question. The mortgage balance on this second residence that is rented out is $1,000,000. Would I apply the 25% non-deductible portion on Sched E first and then let the personal use portion flow to Sched A...OR...would I report the full $27,000 on Sched E and then make the 25% non-deductible adjustment only on Schedule A? 

Thanks for any additional insight.