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:

How Do I Report the Combat Pay Exclusion?

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 2018 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:

1. From within your TaxAct return (Online or Desktop) click Federal. On smaller devices, click the menu icon in the upper left-hand corner, then select Federal
2. Click Wages and Salaries in the Federal Quick Q&A Topics menu to expand the section, then click Wage income reported on Form W-2
3. Click New Copy of Form W-2 (Desktop users click Add) to enter a new form or Review to review a form already created
   1. 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.
   2. If you use Quick Entry, enter code Q and the amount for Box 12.