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.
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. CDs: typically 3 months to 5 years. Early withdrawal incurs penalty (3-12 months interest typical). No secondary market — must wait to maturity. Treasuries better for uncertain horizon; CDs better for known-date needs.
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.