If you are a member of the U.S. Armed Forces who serves in a combat zone, you may exclude certain pay from your income. You do not actually need to show the exclusion on your tax return because income that qualifies for the exclusion is not included in the wages reported on your Form W-2.
Per IRS Publication 3 Armed Forces' Tax Guide
, page 9:
The wages shown in box 1 of your Form W-2 should not include military pay excluded from your income under the combat zone exclusion provisions. If it does, you will need to get a corrected Form W-2 from your finance office.
You cannot exclude as combat pay any wages shown in box 1 of Form W-2.
If you elect to report nontaxable combat pay (for the Earned Income Credit calculation, for example), the amount is entered on Form W-2, Box 12 in TaxACT.
To enter nontaxable combat pay for Form W-2, Box 12:
- From within your TaxACT return (Online or Desktop) click the Federal Q&A tab
- Click Wages and Salaries to expand the section, then click Wage income reported on Form W-2
- Click Add to enter a new form or Review to review a form already created
- If you use Step-By-Step Guidance, continue to the screen for Box 12. Choose Q-Nontaxable combat pay for the Code and enter the total of your combat pay in the Amount field.
- If you use Quick Entry, enter code Q and the amount for Box 12.