First, your active duty pay is exempt ONLY if you are a resident of Pennsylvania but you are on active duty outside of Pennsylvania. If you are on active duty within Pennsylvania, your active duty pay is taxable. Please see https://revenue-pa.custhelp.com/app/answers/detail/a_id/266/~/should-i-report-my-active-military-pay...

Next, you need to make sure that you correctly entered the personal information in My Info. You need to indicate that you are US military and answer the various questions that appear because of that. Also be sure to go through the whole personal information interview, because there are additional screens that appear if you are military.

Next, go to your W-2 and make sure that you checked "active duty military" on the screen AFTER your W-2. You should always complete sections when you start them, in case screens appear that are important.

Next, go to the Pennsylvania interview. Proceed through the screens and shortly you will see one entitled "Compensation Summary". Your military W-2 should be listed here. If it's not, you missed something in My Info or on the W-2 interview. Click the Edit button. On the next screen indicate that the entire amount is not taxable (if that's true).

Continue with the rest of the Pennsylvania interview; the military pay will be removed from Pennsylvania taxable income.