You should first confirm that the 1098 that you have includes the excess interest that you paid. If it does not, you do not have to do anything. It is a refund of money you already paid taxes on, and is not taxable.
If the 1098 does include the refunded amount.
- You should enter the the interest less the amount refunded in Box 1 of the input screen.
- Check the Box below that says The interest amount I entered is different than what's on the 1098
- After you [Continue]
- There is a place to explain why there is a difference.
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