Should I include combat pay?

I'm not sure what you are asking exactly. Combat pay is not taxable, but that will be reflected on your W-2 form. So, all you need to do is enter W-2 form in TurboTax and the program will determine the correct way to report your combat pay on your tax return.

Hi... the EITC (Earned Income Tax CrediT) is asking if I want to include it? It sound like it is giving the option to increase or decrease the refund. 

The Working Families Tax Relief Act of 2004 and the Gulf Opportunity Zone Act of 2005 give military personnel the option of treating combat pay as earned income for purposes of the EIC.

If you and your spouse do choose to include your nontaxable pay as earned income for the EITC, you may owe less tax and get a larger refund. If you choose to include your combat pay, you must include all of it.

Thanks for your answer. I just want to make sure if including it or not on the EICT is optional. I know it will be reported on the w2 but I was not sure for the EICT if thos amount has to be there or not. 

You have a choice to include all or none of your combat pay to qualify for the earned income tax credit. 

Thank you all for your answers.

Other than adjusting the refund amount, what else changes when including or excluding my combat pay?

I am basically looking for what the "down side" is to not including my combat pay and getting the larger refund.

Thanks in advance.

There is no "downside" related to the election of treating combat pay as earned income for the purpose of the earned income tax credit (EITC). This election is specific to EITC only. TurboTax can help you with this election. You can still exclude the combat income from the gross income even though you elect to treat combat pay as earned income for the purpose of EITC. The exclusion from gross income is automatic because of the code Q in box 12 of the W-2.  

Please see IRS Publication 3 for more details.

@Daxxramas