You don't have to worry about any adjustment on the NY side, the program will do it for you. When going through the mortgage interest interview screen Form 1098 (on the federal side) you are entering two numbers: the amount from 1098 ($26,000) and your adjusted amount ($23000). Schedule A (federal) will show $23000, while NY Form IT-196, line 10 will have the $26,000 amount. Once completed, you may confirm this by viewing your .pdf file if you are preparing online, of check in forms if you are using desktop.
