That is true - if you put "0" in Box 2 (Outstanding mortgage principal balance), you will not be able to e-file.
If the mortgage in question was paid off, enter "1" in Box 2 of the 1098 Mortgage Interest form.
From an economic perspective, entering "1" is accurate - you owed virtually nothing on this mortgage at the end of 2020.
This will not have any effect on your tax calculation and will not generate an error in either TurboTax or with the IRS
There are many places in TurboTax where you must make a non-zero entry, primarily to let the program know that you answered the question and that the answer makes some sense.
In this case, entering "$1" tells the program that you didn't forget to answer the question and that you had at least some amount of a mortgage loan balance to justify claiming an interest deduction.
