T-Bill Tax Equivalent Yield Calculator
T-Bills are exempt from state and local taxes — but subject to federal income tax. Enter your details below to see your true after-tax yield and how much you save compared to a CD.
TreasuryDirect minimum is $100 (in $100 increments). Most brokerages require $1,000.
Choose the duration matching your T-Bill purchase.
Not sure? Use your marginal (top) bracket from your last tax return.
T-Bills are 100% exempt from state tax — this is used to calculate your tax equivalent yield. Examples: CA = 13.3%, NY = 10.9%, TX/FL = 0%. Find your rate →
Are T-Bills Tax Exempt?
When comparing T-Bills to CDs or savings accounts, the headline rate doesn't tell the full story. T-Bills are exempt from state and local taxes, which means investors in high-tax states like California, New York, or Oregon keep significantly more of their earnings.
How T-Bill Tax Equivalent Yield Is Calculated
- Gross Earnings = Face Value × (Discount Rate / 100) × (Days / 360)
- Purchase Price = Face Value − Gross Earnings
- Investment Rate (BEY) = (Gross Earnings / Purchase Price) × (365 / Days) × 100
- Federal Tax = Gross Earnings × Federal Tax Rate
- After-Tax Earnings = Gross Earnings − Federal Tax
- After-Tax Yield = (After-Tax Earnings / Purchase Price) × (365 / Days) × 100
T-Bill vs CD: The State Tax Advantage
A CD earning 5% in California (13.3% state tax) loses a portion to state tax that a T-Bill investor keeps entirely. The "CD Equivalent Rate" tells you exactly what CD rate you'd need to match your T-Bill after all taxes — federal and state.
States With No Income Tax
If you live in Texas, Florida, Nevada, Washington, Wyoming, South Dakota, Alaska, or Tennessee — you pay no state income tax. New Hampshire is also phasing out its tax on interest and dividend income. In these states, the T-Bill state tax advantage is zero, and the comparison with CDs is purely on federal tax terms.
Related Calculators
Learn more: What Are Treasury Bills — Complete Guide · Are T-Bills Worth It? · Best T-Bill Duration Guide
Frequently Asked Questions
Are T-Bills exempt from state tax?
Yes — by federal law, interest earned on U.S. Treasury securities including T-Bills is exempt from all state and local income taxes. You only pay federal income tax on T-Bill earnings. This exemption applies in all 50 states.
What is tax equivalent yield for T-Bills?
Tax equivalent yield is the CD or savings account rate you would need to match your T-Bill's after-tax return. Because T-Bills skip state tax, a T-Bill at 5% often beats a CD at 5.5% for investors in high-tax states. Use this calculator to find your exact equivalent rate.
How much state tax do I save with T-Bills?
It depends on your state tax rate. In California (13.3% state tax), a $10,000 T-Bill earning $250 saves you approximately $33.25 in state taxes compared to a CD earning the same amount. In Texas or Florida (0% state tax), there is no state tax saving.
When do I pay federal tax on T-Bill earnings?
T-Bill earnings are taxable in the year the T-Bill matures — not when you buy it. Your brokerage or TreasuryDirect will send a 1099-INT form after year-end reporting your earnings. You report this as ordinary income on your federal tax return.