T-Bill vs HYSA: After-Tax Comparison
This calculator compares Treasury bill and high-yield savings account returns after federal and state taxes. T-bill interest is exempt from state income tax, while HYSA interest is taxed at both levels. Enter your state, your federal bracket, and both yields. The tool shows the after-tax dollar return for each so you can see which one keeps more of your money.
After tax, the winner keeps
The comes out ahead by over this period.
Dead heat — after tax there is nothing between them.
- Over the periodT-billHYSA
- Interest earned
- Federal tax
- State taxTreasury interest is state-exempt
- You keep
A savings account would need APY to match the bill
Interest on Treasury securities is exempt from state and local income tax (31 U.S.C. §3124); bank interest is not. This is a marginal-rate estimate — it applies your top federal and state rates to the interest and ignores deductions, NIIT and local taxes.
Why State Tax Changes the Winner
Before taxes, a HYSA and a T-bill with similar rates look nearly identical. After taxes, they can diverge sometimes meaningfully. The difference comes down to one rule: Treasury bill interest is exempt from state and local income tax, while interest from a high-yield savings account is fully taxable at every level. In states with no income tax such as Texas, Florida, and Washington, this exemption has no value. A HYSA and a T-bill at the same pre-tax rate produce the same after-tax return. But in high-tax states like California, New York, or New Jersey, the exemption saves you real money. The higher your state bracket, the wider the gap. For a $30,000 deposit, even a one-percentage-point after-tax difference means roughly $300 per year. The calculator lets you enter your specific state and bracket so the comparison reflects your actual situation, not a national average.How T-Bill Interest Is Taxed
Treasury bills are issued by the U.S. Department of the Treasury. You buy them at a discount and receive the full face value at maturity. The difference is your interest income. That income is subject to federal income tax in the year the T-bill matures or is sold. Report it on your federal return just like bank interest. The state-tax exemption applies automatically. You do not need to file a separate state form or claim a deduction. Your 1099-INT from TreasuryDirect or your brokerage will note the Treasury interest amount, and most tax software handles the exemption correctly. One detail worth noting: T-bills require you to hold a minimum term, typically 4, 8, 13, 17, 26, or 52 weeks. During that time, your money is not instantly accessible the way a HYSA balance is. The calculator focuses on the tax comparison, but consider your liquidity needs before moving a large balance out of savings.T-bill rates and HYSA rates fluctuate independently. Run this comparison whenever either rate changes to see if the after-tax winner has shifted.
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Sources
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T-bill state tax exemption: TreasuryDirect (treasurydirect.gov). HYSA interest taxation: IRS, Form 1099-INT.
- Annual percentage yield formula — Truth in Savings Act, Regulation DD, 12 CFR Part 1030, Appendix A (Consumer Financial Protection Bureau).
- Compound interest and annuity formulas — standard financial mathematics; every figure is computed from the inputs you enter.