Here's a somewhat more measured opinion:
Not all HDP is considered Combat pay...it's more a consideration of where you are when you get it (not sure about HFP)
IF the DOD considers any of your income and HDP/HFP supplements to be included in your COMBAT pay, they will reduce box 1 of your W-2 form by that Base pay + Supplemental income amounts that qualifies...AND there will be a box 12 entry with a Code Q and the total amount eligible for reduced taxes alongside.
Entering your paper W-2 data into the tax software....as it is on your Paper form, takes care of all that income properly.
IF..IF..your W-2 does not have the box 1 reduced, and a box 12 Code Q and $$ alongside, then either it was not Combat pay, or you received an incorrect W-2 that you have to get cleared up with HR&Payroll and a corrected W-2 issued. Occasionally they do make mistakes.
____________*Answers are correct to the best of my knowledge when posted, but should not be considered to be legal or official tax advice.*
