T-Bill vs Money Market Fund Calculator
Money market funds and T-Bills are the two most popular options for safe short-term cash. They look similar on the surface — but differ in rate stability, state tax treatment, and liquidity. Enter your details to see which wins after all taxes.
Amount you plan to invest in either option.
Current T-Bill auction rate from TreasuryDirect.gov.
Money market fund will be compared over the same period.
The current 7-day yield of your money market fund (shown on fund page or brokerage).
Treasury money market funds (e.g. Fidelity FZFXX, Vanguard VMFXX) may pass through state tax exemption. Prime funds do not.
T-Bills are always exempt from state tax. Money market fund state tax depends on fund type above. Examples: CA = 13.3%, NY = 10.9%, TX/FL = 0%. Find your rate →
T-Bill vs Money Market Fund — Full Comparison
| Feature | T-Bills | Money Market Funds |
|---|---|---|
| Issuer / Backed By | U.S. Government directly | Fund holds T-Bills, repos, commercial paper |
| FDIC / Gov Insurance | ✅ Direct U.S. Gov obligation | ❌ Not FDIC insured — but extremely low risk |
| Rate Type | Fixed at auction — locked in | Variable — changes daily with market |
| Federal Tax | ✅ Yes — at maturity | ✅ Yes — monthly distributions |
| State Tax (Treasury MMF) | ✅ Exempt | ✅ Mostly exempt (check fund prospectus) |
| State Tax (Prime MMF) | ✅ Exempt | ❌ Fully taxable |
| Liquidity | Fixed maturity — sell via broker only | ✅ Daily liquidity — withdraw anytime |
| Expense Ratio | None | Typically 0.01–0.50% annually |
| Min. Investment | $100 on TreasuryDirect | Often $0–$1,000 |
| Best For | Locked-in rate, state tax savings | Daily liquidity, easy access |
Money Market Fund Types — State Tax Matters
Not all money market funds are equal from a tax perspective. This is the most overlooked difference when comparing T-Bills to money market funds:
| Fund Type | What It Holds | State Tax | Examples |
|---|---|---|---|
| Government / Treasury MMF | U.S. Treasury securities only | ✅ Exempt (passes through) | Fidelity FZFXX, Vanguard VMFXX, Schwab SWVXX |
| Prime / Blended MMF | Mix of T-Bills, repos, commercial paper | ❌ Fully taxable | Many retail bank money market accounts |
When Should You Choose T-Bills Over a Money Market Fund?
- You want a locked-in rate — T-Bill yield is fixed at purchase, MMF rates float
- Rates are expected to fall — lock in today's higher rate before it drops
- You use a Prime MMF and live in a high-tax state — T-Bills save state tax
- You have over $250,000 — T-Bills have no insurance cap; MMFs are not FDIC insured
- You want the absolute highest certainty — T-Bills are direct U.S. government obligations
When Should You Use a Money Market Fund?
- You need daily liquidity — withdraw or invest any amount any day
- You use a Treasury MMF — nearly identical state tax treatment to T-Bills
- You want zero setup effort — no TreasuryDirect account or auction timing needed
- You want automatic reinvestment — MMF earnings reinvest daily automatically
- You are uncertain about timing — MMFs let you hold cash flexibly between investments
See your real after-tax T-Bill yield and what a money market fund needs to match it.
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 better than money market funds?
T-Bills often offer a higher yield than money market funds and a locked-in rate. Money market funds are more liquid (withdraw anytime) but rates are variable and not guaranteed. T-Bills that hold U.S. Treasuries may also pass through the state tax exemption — check your fund's prospectus.
What is the main difference between T-Bills and money market funds?
T-Bills are direct U.S. government securities with a fixed rate and fixed maturity. Money market funds are pooled investment vehicles that hold short-term securities (including T-Bills) and offer daily liquidity. Money market funds are not FDIC insured but are considered very low risk.
Which is better for large cash holdings over $250,000?
Both T-Bills and Treasury money market funds are suitable for amounts above the $250,000 FDIC limit. T-Bills are direct government obligations with no fund expense ratio. Treasury money market funds charge a small annual fee but offer daily liquidity.