What to do about my friend being racist

most of the time me and my friend are fine with eachother and like spending time together but sometimes he just whispers the n word or does something corny and I just don't really know how to react to it. I usually just awkwardly laugh it off and when he almost writes it down but switches last second I pretend it's funny when it isn't. I realised that that's not the best thing to do so I'm just wondering what I should do going forward with him.