Income earned in a combat zone on your tax return is not taxed, but you can include that income on your tax return to determine whether you qualify for the Earned Income Tax Credit (EITC). If you do qualify, you could decrease the amount of tax you owe or increase your refund.
The EITC requires that you reside in the U.S. for at least 6 months, but service members are considered to live in the U.S. while on extended active duty outside the country.
E-filing with 1040.com makes it easy to see whether you benefit more from including combat pay or excluding it. See our Tax Guide post on combat pay and the Earned Income Credit for more information.