To qualify for the hardship exemption (no 10% penalty) for a 401 (k) distribution, you must meet the IRS definition total and permanent disability:

A person is permanently and totally disabled if both of the following apply. He or she can't engage in any substantial gainful activity because of a physical or mental condition. A physician determines that the disability has lasted or can be expected to last continuously for at least a year or can lead to death.

If you do qualify based on the above, although you would avoid the 10% penalty, your income would be taxed at your ordinary income rate. The income is not a deduction.

However you may be able to deduct your medical expenses due to your disability.

See What are the exceptions to the penalty for an early withdrawal from my 401(k)?

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