You're correct that the HELOC interest would not be deductible in your situation. The IRS is aware that Form 1098 is not always correct, so if you enter either $1 or the amount of first withdrawal of principal in Box 2, it is allowed. Some HELOC 1098's list the entire amount available for draw in Box 2.
TurboTax does not like 0's, and wants more information. It's difficult to program for all types of errors on Form 1098's, but since the interest is not deductible, it doesn't affect a Mortgage Interest Limitation calculation, which is what concerns most taxpayers.
@dgrenn
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