If you were permanently and totally disabled, this would be considered an exception to the 10% penalty on early withdraw.
If you were just temporarily disabled and took it out to pay health insurance, then the amount that is greater than 7.5% of your income would be excluded from the penalty, but the rest would be penalized.
Some or all of it, whether or not it is excluded from the penalty may be included in your taxable income, depending on how long you have had it and the amount of the distribution that was earnings vs what you contributed.
The best thing to do is to walk through the steps of entering your 1099-R into TurboTax and answer the questions carefully. As you continue through it will ask you about exclusions and will determine, based on your entries, what about is taxable. To enter your 1099-R select the following
- Income
- Show more next to Retirement Income
- Start next to 1099-R
TurboTax will walk you through the same steps with the state. State rules do vary greatly.
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