You are correct. TurboTax should do this for you if you have marked that the W-2 is active duty pay when you entered it. But you can double-check. When you go through the Kentucky return, just make sure that the amount has been excluded. If not, you can allocate your income by subtracting the military pay from the total. Kentucky does not tax military income. Here is an FAQ on this: https://ttlc.intuit.com/replies/4777389
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