When you first enter the amount of gross benefits from the 1099-LTC in the Long-term Care interview, the tax due will increase (or the refund decrease), because, by default, the program assumes that the distribution you received is taxable, until you tell the program otherwise.
Two screens later in my version of TurboTax (yours may vary a little), I saw a screen entitled "Additional LTC information".
This screen asks for "Qualified LTC Benefits". Here the program is asking you what part of the distribution was spent on qualified medical expenses.
If the entire distribution was spent on qualified medical expenses, then enter the same number here, and you will see that now that the program knows that the entire distribution was for qualified medical expenses, the tax due or refund amount will go back to where it was.
