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 12:
Ordinarily, you don't have to do anything for this exclusion to apply. The exclusion will be reflected on your Form W-2. The wages shown in box 1 of your 2017 Form W-2 shouldn't include military pay excluded from your income under the combat pay exclusion provisions. If it does, you will need to get a corrected Form W-2 from your finance office. You can't 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: