T-Bill vs Money Market Fund Calculator (After-Tax Treasury vs MMF Comparison)
T-Bills and money market funds may look similar, but key differences in tax treatment, rate stability, and liquidity can significantly impact your returns.
💡 T-Bills usually outperform money market funds after taxes, especially in high-tax states — but MMFs offer daily liquidity and flexibility.
Check latest rate → TreasuryDirect.gov
The money market fund is compared over the same period.
7-day yield shown on your fund page or brokerage.
Treasury MMFs (e.g. Fidelity FZFXX, Vanguard VMFXX) are state-tax exempt. Prime funds are not.
CA = 13.3%, NY = 10.9%, TX/FL = 0%. T-Bills are always state-tax exempt. MMF state tax depends on fund type above. Find your rate →
How to Compare T-Bills vs Money Market Funds
- Compare the T-Bill rate vs money market fund yield
- Check if the MMF is Treasury (state tax exempt) or Prime (taxable)
- Apply federal and state taxes correctly
- Compare final after-tax returns
This calculator automatically performs all these steps and shows which option gives you higher returns.
How This Calculator Works
The formula (done automatically for you):
- T-Bill profit = Investment × Rate ÷ 100 × Days ÷ 360
- T-Bill tax = Profit × Federal Rate (state tax = $0, always exempt)
- MMF profit = Investment × Rate ÷ 100 × Days ÷ 365 (simple interest)
- MMF tax = Profit × Federal Rate + Profit × State Rate (if Prime fund)
- You keep = Profit − All taxes
T-Bill:
Profit = $10,000 × 4.5% × (182 ÷ 360) = $227.50
Federal tax = $50.05 State tax = $0 (exempt)
You keep = $177.45
Prime Money Market Fund:
Profit = $10,000 × 4.5% × (182 ÷ 365) = $224.38
Federal tax = $49.36 State tax = $20.19
You keep = $154.83
T-Bill wins by $22.62 — same headline rate, but the T-Bill is state-tax exempt and uses a 360-day basis. Switch to a Treasury MMF and the gap narrows significantly.
T-Bill vs Money Market Fund — Key Differences That Impact Your Returns
| 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 (FAQ)
Are T-Bills better than money market funds?
T-Bills are often better than money market funds for higher and predictable returns. They lock in a fixed rate and are usually more tax-efficient, while money market funds offer daily liquidity but have variable rates.
What is the main difference between T-Bills and money market funds?
The main difference is that T-Bills have a fixed rate and maturity, while money market funds offer variable rates and daily liquidity. T-Bills are direct U.S. government securities, while money market funds are pooled investments holding short-term assets.
Which is better for large cash holdings over $250,000?
Both T-Bills and Treasury money market funds are suitable for amounts over $250,000. T-Bills have no insurance limit and no fees, while money market funds offer flexibility with daily access but include small expense ratios.