@zomboo If ADU is leased, then it is a passive business activity. Copy paste of your observation from 1.163T
"Personal debt is repaid first in the order. Home mortgage debt is classified as personal debt consisting of Acquisition debt and Equity debt. Pub 936 specifies that Note that interest on personal debt is generally not deductible but the tax code makes an exception for interest on home acquisition debt."
If you borrow money and use it for personal/primary residence and a passive business activity, you do have mixed usage of debt. And thus need to (or have choice to?) pay off personal debt (debt on primary residence) before paying off debt allocated for the portion which generates passive activity income.
Are you sayin publication 587 says otherwise?
