Treasury vs CD Calculator
Compare US Treasury bonds vs Certificates of Deposit (CDs) — calculate tax-equivalent yield including state tax savings on Treasuries. Often Treasuries win for high-state-tax residents even at lower headline rate.
Compare the after-tax yield — Treasury interest is exempt from state and local income tax, CD interest is not.
The Key Tax Difference
Treasury bonds (T-bills, T-notes, T-bonds): interest is federally taxable but EXEMPT from state and local income tax. CDs: interest is taxable at all levels — federal + state + local. For California (13.3%), New York City (~14%), or Hawaii (11%) residents, this is a major effective yield difference. Even at a lower headline rate, Treasuries often net more after-tax than CDs.
Tax-Equivalent Yield Formula
Treasury TEY = Treasury Yield ÷ (1 - State Tax Rate). Example: 5% Treasury yield, 9.3% CA state tax = 5% ÷ 0.907 = 5.51% TEY. Compare 5.51% to your local CD rate. If CD is below 5.51% (which it often is), Treasury wins despite lower headline. For tax-free states (TX, FL, WA, NV, AK, SD, WY, NH, TN): no advantage — pick higher headline rate.
Liquidity and Term Comparison
Treasuries: any term 4 weeks to 30 years. Highly liquid secondary market (sell anytime at market price — could be loss if rates rose). T-Bills under 1 year are most liquid. Bank CDs: typically 3 months to 5 years. Early withdrawal incurs penalty (3-12 months interest typical) and there is no secondary market — you wait to maturity. Brokered CDs are the exception (see below). Treasuries better for uncertain horizon; CDs better for known-date needs.
Brokered CDs vs Bank CDs: The Exception to the Liquidity Rule
The comparison above treats CDs as illiquid, which is true of a CD bought directly from a bank but not of a brokered CD — one issued by a bank and sold through a brokerage. Brokered CDs generally have no early-withdrawal penalty at all. Instead you sell them on a secondary market, which changes the shape of the risk rather than removing it: if rates have risen since you bought, your lower-yielding CD is worth less and you sell at a discount, losing part of your principal, and your broker may charge a fee on the sale. In thin market conditions some brokered CDs have no bid at all, leaving you holding to maturity anyway (SEC Investor Bulletin: Brokered CDs). That makes a brokered CD behave much more like a Treasury than like a bank CD, which matters for the calculation above in two ways. First, the liquidity argument for Treasuries largely disappears — compare on after-tax yield alone. Second, the tax argument does not: brokered CD interest is still fully taxable by your state, so the tax-equivalent yield formula still applies and a Treasury still wins at equal headline rates in a high-tax state. One more trap worth knowing: many brokered CDs are callable, meaning the issuing bank can redeem them early if rates fall — exactly when you would most want to keep the high rate. Check the call schedule before comparing a headline rate against a Treasury. Updated 2026-09-03.
FDIC vs Treasury Backing
CDs: FDIC insured up to $250,000 per depositor per institution. Above that, credit risk of bank applies. Treasuries: backed by full faith and credit of US government — considered the world's safest asset, no FDIC limit. For amounts above $250K, Treasuries simpler than fragmenting across multiple banks. Below $250K both are functionally equivalent on default risk.
Sources: TreasuryDirect.gov, FDIC Deposit Insurance Rules, IRC §103. Last updated: May 2026. Not tax advice.
Treasury Bills vs CDs: Protection, Tax and Getting Out Early
A Treasury bill and a bank CD can quote a similar yield and still leave you with different money, because the two differ in three places a headline rate never shows. Tax comes first: interest on Treasury securities is exempt from state and local income tax while CD interest is fully taxable at every level, so the gap widens the higher your state tax rate, and the comparison above is only fair once you look at the after-tax figure. Protection is the second: CDs are covered by federal deposit insurance up to the per-depositor, per-bank limit, whereas Treasuries are direct obligations of the US government and carry no balance ceiling on that backing. Exit terms are the third and least understood. Breaking a CD early triggers the bank's stated interest penalty, a known cost. Selling a Treasury before maturity means selling at market price instead, so you can come out ahead if rates have fallen or take a loss if they have risen, which makes a bill the better instrument when you might need the money and a CD the better one when you want the downside fixed in advance. Treasury terms are published at treasurydirect.gov. Updated September 2026.
When the Treasury State-Tax Advantage Is Worth Nothing
The entire case for Treasuries over CDs in this calculator rests on one thing: Treasury interest is exempt from state and local income tax, while CD interest is not. If you live in a state with no income tax on interest — Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington and Wyoming — that exemption buys you nothing, the tax-equivalent yield collapses back to the stated yield, and the comparison becomes a plain rate-versus-rate question you should settle on the higher number alone. Set the state rate field above to zero to see this. The mirror case matters just as much: the higher your state rate, the further a Treasury can trail a CD on the headline yield and still win after tax, which is why one pair of quotes flips the answer for a California saver and a Texas saver. Holding either instrument inside a tax-deferred IRA or 401(k) also neutralises the advantage, because no state tax is due on either until withdrawal. Source: TreasuryDirect — tax information. Updated 2026-09-18.
Frequently Asked Questions
Are Treasuries still better than CDs if my state has no income tax?
Usually not. The Treasury advantage in this calculator comes entirely from the state and local tax exemption. In Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington and Wyoming there is no state tax on interest to avoid, so the tax-equivalent yield equals the stated yield and you should simply take whichever instrument quotes the higher rate.
Does the Treasury tax advantage apply inside an IRA or 401(k)?
No. Inside a tax-deferred retirement account neither Treasury nor CD interest is taxed in the year it is earned, so the state-tax exemption has nothing to act on. Compare the two on raw yield and on how easily you can exit before maturity instead.
Can I sell a CD before maturity like a Treasury?
It depends which kind. A bank CD has no secondary market — you either wait to maturity or pay an early-withdrawal penalty of typically 3 to 12 months of interest. A brokered CD, bought through a brokerage, usually has no penalty at all and can be sold on a secondary market instead, but you sell at market price: if rates have risen you take a loss on principal, your broker may charge a fee, and in thin markets there may be no bid at all.
Do brokered CDs get the same state tax exemption as Treasuries?
No. That exemption is the whole point of the comparison and it applies only to Treasuries — T-bill, T-note and T-bond interest is exempt from state and local income tax. CD interest, brokered or not, is taxable at federal, state and local level. So even where a brokered CD matches a Treasury on liquidity, the tax-equivalent yield calculation above still favours the Treasury in a high-tax state such as California, New York or Hawaii.
Why might Treasuries beat CDs?
Treasury interest is federal-taxable but EXEMPT from state/local tax. High-state-tax residents (CA, NY, NJ, OR, HI) save 6-13% on the interest income — often more than the CD headline advantage.
What is tax-equivalent yield?
Treasury yield divided by (1 - state tax rate). Adjusts Treasury yield up to apples-to-apples comparison with CDs. Use to compare offers.
Are Treasuries safer than CDs?
Both are virtually default-risk-free. CDs: FDIC up to $250K. Treasuries: full US government backing, no insurance limit. Functionally equivalent under $250K; Treasuries simpler above.
Should I do Treasuries or CDs?
High state tax + uncertain horizon + above $250K = Treasuries. Tax-free state + known-date need + under $250K = whichever has higher headline rate. Always compare tax-equivalent yields, not headlines.
Is this tool free?
Yes. 100% free, no sign-up. All math runs in your browser — your investment data never leaves your device.
Are Treasury bills really better than CDs after tax?
Often, but it depends on where you live. Treasury interest is exempt from state and local income tax while CD interest is not, so in a high-tax state a Treasury can win even at a slightly lower quoted yield, and in a state with no income tax the advantage disappears. Compare the after-tax yield rather than the quoted rate before deciding.
What happens if I need my money before maturity?
The two behave differently. A CD charges the bank's stated early withdrawal penalty, a cost you know in advance. A Treasury is sold on the secondary market instead, so the price moves with interest rates and you may receive more or less than you paid. If there is a real chance you will need the cash early, a Treasury gives flexibility with price risk, while a CD gives a fixed, known exit cost.