Any form of pay earned while on deployment in a combat zone is excluded from federal income tax. This translates to a significant tax savings for the active service member in combat and his family back home.
Nontaxable combat pay is reported on your form W-2 in box 12 with code Q. You just enter your W-2 in TurboTax and make sure that you enter the amount with code Q in box 12. And TurboTax will exclude that amount form your taxable income.
Please read this TurboTax article for more information.
Please also note that Enlisted active duty and reserve military members can file free federal and state taxes with TurboTax Online using the TurboTax Military Discount.
See details in above article.
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