T-Bill vs Money Market Comparison Calculator
Treasury Bills are state-tax-exempt, money market funds are not. For high-state-tax investors (CA, NY, NJ), the after-tax yield gap can exceed 50 bps even when nominal rates match. This calculator surfaces the right cash vehicle for your tax bracket.
Why T-Bills Are State-Tax Exempt
Federal law (31 USC §3124) exempts interest on US Treasury obligations from state and local income tax. This is a structural advantage worth 6-13% of yield depending on your state — material on large cash balances.
Money Market Fund Mechanics
MMFs invest in short-term debt: commercial paper, repos, CDs, sometimes Treasuries. Yields net of fund expense ratio (typically 0.10-0.30%). All distributions are taxable as ordinary income at federal AND state level — no exemption.
Liquidity Trade-Offs
T-Bills mature in 4, 8, 13, 17, 26, or 52 weeks. Selling before maturity requires secondary-market sale (small spread cost). Money market funds settle T+1 with no liquidity penalty — better for emergency reserves or active deal funding.
Source: 31 USC §3124 Treasury Interest Tax Exemption; IRS Publication 550. Last updated: May 2026.