There are exceptions to the rule listed below. In this IRS memorandum there is better clarification for what is taxable and when. Finally, AFLAC clarifies what they meant here. I believe you are saying that you received a 1099-MISC to cover your medical expenses for an event; but, it is greater than what you actually spent so you have taxable income.
If you truly qualify to reduce your income, the easiest way to subtract those additional expenses from your income would be to follow these steps:
Enter the 1099-MISC income
Subtract the nontaxable portion
1. go to the federal income section
2. scroll to the bottom
3. Miscellaneous Income, 1099-A, 1099-C, Start
4. Other income not already reported on a W2 or 1099, Start
5. Other wages? Yes
6. Household employee? Continue
7. Sick pay, continue, Medicaid, continue
8. Other Earned Income? Select Yes, continue
9. Source of income? Select Other
10. Enter description - 1099MISC nontaxable per memo 201719025
11. Amount, enter a negative value of the exempt expenses
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