Treasury Bill vs CD Calculator 2026
Treasury bills (T-Bills) are exempt from state and local tax; CDs are not. In high-tax states (CA 13.3%, NY 10.9%), T-Bills often beat CDs by 30-100bps after tax — even when CD has higher pre-tax rate. This tool computes tax-adjusted yields.
Why T-Bills Beat CDs in High-Tax States
Treasury Bills exempt from state and local income tax under 26 USC §3124. In high-tax states (CA, NY, NJ, OR, MA), this exemption adds 30-130 basis points to effective yield. CDs taxed federally + state — full state tax bite. Crossover point: if state rate is 8%+, T-Bills typically win even when CD has 15-25bps higher pre-tax rate.
Other T-Bill Advantages
Three besides state tax exemption: (1) Backed by full faith and credit of US government — zero credit risk vs CD bank failure (FDIC insurance applies but $250K limit). (2) Highly liquid — sell on secondary market with minimal spread. (3) No early withdrawal penalty (CDs typically forfeit 3-12 months interest). T-Bills are functionally equivalent to a flexible savings account with state tax benefit.
When CDs Win
CDs better when: (1) State has no income tax (TX, FL, NV, WA, TN, SD, WY, AK, NH partial). (2) Need higher yield than T-Bills (small bank CD specials often 25-50bps premium). (3) Want simpler holding without broker account. (4) FDIC insurance suffices and amounts under $250K per bank. For amounts above $250K, T-Bills' direct US government backing wins on safety.
Source: 26 USC §3124, Treasury Direct, Bankrate CD Rate Survey 2026. Last updated: May 2026.