No, you don’t select the “worked outside of the U.S.” box for uncommon situations. US military income is always considered to be earned within the US even when stationed outside the US.
If you were deployed to a combat zone, you should have your combat pay listed in box 12 on your W-2 with the code Q. Please make sure it is entered.
If you qualify for the Earned Income Credit then you can elect to include or not include your combat pay to see what is more beneficial.
- Login to your TurboTax Account
- Click on the Search box on the top and type "EIC"
- Click on “Jump to EIC”
- Continue "Do you want to include your combat pay in your income?" and select "Yes" and "Continue", write down your EIC and refund
- Click "Back" and select "No" and then click "Continue".
- Compare new EIC and refund with written-down amounts.
Please see Can I treat my nontaxable combat zone pay as earned income? and What are the qualifications for the Earned Income Credit (EIC or EITC)? for additional information.
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