After federal and state tax, does a T-bill beat my savings account?
Compare a savings account or CD with a Treasury bill after tax: the bill’s interest skips state and local income tax, so the savings rate has to be higher to keep up.
Federal tax bracketYour top federal bracket on ordinary income. Prefilled from your Money Map (2026 single-filer brackets).
SAVINGS OR T-BILLT-BILL COMES OUT AHEAD
$129
On $25,000 for 1 year, a 4.00% savings account or CD earns $710 after federal and state tax and a T-bill at 4.37% earns $839 after federal tax only, so the bill is $129 ahead. The account would need to pay 4.73% to tie the bill.
Bill after tax
3.36%
Savings after tax
2.84%
Tie at APY
4.73%
State tax skipped
$55
UNDERSTAND YOUR RESULT
How far the bill is ahead of the account, after tax, over the years
Bill minus account (after-tax interest)
After one year the bill is $129 ahead of the account; after 5 years, $731 ahead of the account; after 10 years, $1,703 ahead of the account. Both grow after tax each year, so the gap widens as the interest earns interest.
From quoted yield to what you keep, per year
| Per year | Savings or CD | T-bill |
|---|---|---|
| Quoted yield | 4.00% APY | 4.37% coupon-equivalent |
| As an annual rate | 4.00% | 4.42% |
| Federal tax | −0.96% | −1.06% |
| State tax | −0.20% | None |
| After tax | 2.84% | 3.36% |
A bill quoted at 4.37% earns 4.42% a year once its semiannual rate is compounded; its interest is taxed by the federal government only. Your 4.00% account is taxed twice, at 24% federal and 5% state, and keeps 2.84%.
What the savings account has to pay to tie the bill, by state tax rate
| State income tax | Savings APY needed to tie |
|---|---|
| 0% | 4.42% |
| 3% | 4.60% |
| 5% (yours) | 4.73% |
| 7% | 4.87% |
| 9% | 5.01% |
| 11% | 5.17% |
| 13% | 5.33% |
At 24% federal and 5% state the account must pay 4.73%; in a state with no income tax it must still pay 4.42%, because the bill’s 4.37% quote is 4.42% as an annual rate. The higher your state rate, the more the account has to pay.
What moves the needle
Each row re-runs the calculation with one change. Click to apply.How it's computed
FORMULA
Bill annual rate = (1 + coupon-equivalent yield ÷ 2)² − 1
Bill after tax = bill annual rate × (1 − federal rate)
Savings after tax = APY × (1 − federal rate − state rate)
Interest after tax = balance × ((1 + after-tax rate)^years − 1), taxed and reinvested each year
Tie APY = bill annual rate × (1 − federal rate) ÷ (1 − federal rate − state rate)
- The bill’s yield starts at the Treasury’s 26-week coupon-equivalent figure for September 29, 2026 (4.37%). It changes every day, and a longer hold assumes each new bill pays the same, which nobody can promise.
- The savings rate is an example until you replace it with your account’s APY; the FDIC’s national average savings rate was 0.37% on September 21, 2026, and banks can change rates at any time.
- Federal and state rates are added and state tax is not treated as deductible. The 3.8% Net Investment Income Tax that applies at higher incomes, the year in which a bill’s interest is reported, and state treatment of money-market funds that hold Treasuries are not modelled.
- Safety and access are not priced. The FDIC insures deposits to at least $250,000 per depositor, per bank, per ownership category; Treasury bills are backed by the U.S. government. A bill can be sold before it matures, at a price that may differ from what you paid; a savings account can usually be emptied at par.
- Compared over 1 year on $25,000, with each year’s interest taxed and the rest kept invested.
WORKED EXAMPLE · SAMPLE NUMBERS
Bill: a 4.37% coupon-equivalent yield is 4.42% a year; after 24% federal tax it earns 3.36%, so $25,000 earns $839 in 1 year. Savings account: 4.00% less 24% federal and 5% state tax leaves 2.84%, so it earns $710. The bill is $129 ahead; the account ties it at 4.73%.
SOURCES
[1]Daily Treasury Bill Rates (26-week coupon equivalent)U.S. Department of the Treasury[2]Treasury Bills: federal tax due on interest, no state or local taxesTreasuryDirect, U.S. Department of the Treasury[3]31 U.S. Code § 3124: Exemption from taxationLegal Information Institute, Cornell Law School[4]National Rates and Rate CapsFederal Deposit Insurance Corporation[5]Deposit insurance: how it worksFederal Deposit Insurance CorporationHSBuilt by Hussain Sehorewala · checked against worked examples · Sep 29, 2026
Keep this number honest as your life changes.
Put it on your Money Map and it re-runs as you change the seven numbers. It stays in this browser, and the calculator stays free.
Questions about this result
Yes. Federal law (31 U.S.C. § 3124) exempts U.S. government obligations from state and local taxation, and TreasuryDirect lists federal tax due on bill interest with no state or local taxes. The interest is still taxed as federal ordinary income, and the exemption does not apply to a savings account or CD.
It depends on the rates and on your state. On the example on this page, $25,000 for one year at 24% federal and 5% state tax, a T-bill quoted at 4.37% earns $839 after tax and a 4.00% savings account earns $710. The account would need to pay 4.73% to tie the bill.
Only if it pays more. With no state tax the bill keeps its full 4.42% annual rate before federal tax (its 4.37% quote compounded twice a year), so a savings account has to pay 4.42% to tie. At 4.00% the bill is still ahead by $79 on the example; a 4.5% account would beat it by $16.
A bill’s quoted coupon-equivalent yield is a semiannual rate. Compounded twice a year it is 4.42%, and that annual figure is what should be compared with a savings account’s APY. The page does the conversion for you.
The FDIC insures deposits to at least $250,000 per depositor, per bank, per ownership category, and Treasury bills are backed by the U.S. government. A savings rate can drop at any time; a bill locks its yield for 26 weeks, but the next bill may pay less. A bill sold before it matures can fetch a different price than you paid.
The Treasury’s Daily Treasury Bill Rates for September 29, 2026, the 26-week coupon-equivalent yield. It moves every day, so the page starts there and lets you change it; use today’s figure before you decide.
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