Hello and thank you for using Just Answer,The IRS does allow an exemption from the penalty if they require the distribution (they levy the 401K) but if the taxpayer does this on their own, there is no exemption form the penalty.The state taxes paid would be allowed as a deduction in the year paid though. No penalty or interest amounts but the actual taxes paid are allowed.
If the state taxes were income or property taxes then you can claim them on the Schedule A in their respective places (line 5 or 6).
Let me know after you read if you have further questions please.
Thank You. Nothing else
You can still look to other areas . If your medical was high or you paid higher education costs.
Those may be areas to reduce the 10% penalty.