How do I mark my military W-2 as active duty income?

You're right, the Illinois military pay exclusion  is triggered in the Federal section of TurboTax by marking your military W-2 as active duty income.  

Federal:

To mark you W-2 as active duty wages in TurboTax:

• Once in you return, click Federal Taxes tab and then choose Wages & Income
• Click Edit next to your military W-2
• Click Continue on the W-2 entry screen to get to the screen titled "Do any of these uncommon situations apply to this W-2?
• Click the box to the left of Active duty military (see screen shot below)

Illinois state return:

When you move through your Illinois state return, you will come across a page titled “Military Pay Exclusion”.  Be sure your taxable military pay (W-2 Box 1) is listed in the box for the exclusion.   (see screen shot)

For more information please see Publication 102, Illinois Filing Requirements for Military Personnel.