I'm not specifically familiar with MI rules and MI TurboTax (TT) software, but most other states have a similar rule. This is how it usually works:
You must first identify in the federal personal info section that you are military. This will prompt the state software to ask the right question. In the state section you will be asked to enter the military income that is exempt (usually box 1 of your W-2). That is, the TT software does not automatically exempt your military pay, you must re-enter it as a deduction, in the state section.
