Get your taxes done using TurboTax

Yes, you can make this entry in the forms mode as you describe.  However, in the step-by-step federal interview in the "Retirement" section, using the "IRA, pension 1099R"  topic, after entering your form 1099R information, you will arrive at a page titled "Where is this distribution from?"  One of the choices is "Retired or retainer pay of the uniformed services of the US".  If you select that option, your military retired pay will be excluded from AZ income on line 29b form 140.