IF Combat pay is not included in line 1 of your W-2 forms (and box 12 code Q)...then you probably don't have to do that.
Box 1 of your W-2 should be lower than boxes 3or5....so Combat pay is not included in your Federal income. (It should never happen anyhow)
(Though, I admit I don't have the NY software installed myself) Usually the software takes care of it automatically.
@rjs
Does the NY software deal with Combat pay automatically...as long as income properly removed from box 1 of the W-2?
@SteamTrain - Yes, the NY software deals with it automatically. See the answer I posted below. There's really nothing to deal with. Income is transferred from the federal return to the NY return. If the combat pay is not included in federal income, it won't be included in NY income. The NY instructions allow a specific subtraction for combat pay that was included in federal income. That's what the question that the OP is asking about in the NY interview is referring to. But I don't know under what circumstances you would have combat pay included in federal income.
VA has (or used to have) a similar line...but again, I don't know why combat pay would ever be included in Federal income.
If your combat pay is not included in box 1 of your W-2, you should not enter anything for Combat Pay Included in Federal Income, because you do not have any combat pay included in your federal income. As long as the combat pay is not included in box 1 of your W-2, it will not be included in the income on your New York tax return.
TurboTax asks the question because New York allows you to subtract from your New York income any combat pay that was included in the income on your federal tax return. I don't know under what circumstances you might have combat pay included in your federal income. If it's not included in box 1 of your W-2, it's not included in your federal income.