dmertz
Level 15

Deductions & credits

Unless you were age 55 or over in the year you separated from service from the company providing the 401(k), Code 1 is correct.  Using a distributions from a 401(k) to buy a home does not qualify as an exception to the early-distribution penalty.  That exception is only available for a distribution from an IRA for the purchase of a first home, not for a distribution from a 401(k).