My husband got a 1099-R for his 401k withdrawal however it included his loan draw from that which was used to buy first home purchase. The 1099 listed this amount in the taxable amount! I know I can do another form to show this amount was an exception however do I also subtract this amount when entering on the taxable amount? If I do that it gives us back almost $700 more but if not only about $200 by just using the exception tax schedule.

Typically, withdrawals from 401k plans before retirement age are discouraged /prohibited except under certain hardship circumstances such as buying a home; tax law has no 401k hardship exemptions from withdrawal penalties and taxes, meaning withdrawing from a 401k can be expensive. However, First-home rules are least advantageous for traditional IRAs. You and your spouse can each take up to $10k from your traditional IRAs for a first-home purchase without the 10% early-withdrawal penalty, but the withdrawal is still taxable.