I was under the impression that if I took money out from my 401k to pay for my down payment it wouldn’t be taxed, is that true?

No, you will be assessed income tax (the amount of the distribution is added to your income...but you won't have to pay the 10% early distribution penalty if you are under 59 1/2 and satisfy the conditions.

There's NO housing related exemption for 401k distributions.

When you take money from a traditional IRA there is not a 10% early withdrawal penalty if you are a first time home buyer under the age of 59 1/2.  There is no such exception to the early withdrawal penalty for a 401k.  You are subject to a 10% early withdrawal penalty and ordinary income tax on the distribution from your 401k--making it an expensive way to make your down payment.  Sorry.

You should have a 1099R for this.

To enter your retirement income, Go to  Federal> Wages and Income>Retirement Plans and Social Security>IRA  401 k) Pension Plan Withdrawals to enter your 1099R.