Treasury vs. savings calculator: which actually pays more after tax?
Comparing a Treasury bill with a savings account looks simple: pick the higher rate. But Treasury interest is exempt from state and local income tax, and bank interest isn’t. In a state with high income tax, a Treasury yield that looks lower can leave you with more. This calculator compares the two after tax, so you can see which one actually pays you more.
Treasury vs. savings calculator
- Better after tax
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- Treasury after tax
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- Savings after tax
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- Savings APY needed to match
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Interest on Treasury bills, notes and bonds is taxed federally but exempt from state and local income tax. For Treasury ETFs and funds, the share of dividends that comes from Treasury interest is usually exempt too, though some states set conditions. Bank interest is taxed at both levels. The deduction for state taxes on a federal return is not modeled. Yields change; T-bills held to maturity lock a rate, while savings APYs and fund yields can move. Everything here runs in your browser; nothing you enter is stored or sent.
What this calculator can help you understand
- What a Treasury yield and a savings APY are worth after taxes.
- Which one leaves you with more each year.
- The savings APY needed to match a Treasury yield after tax.
When it’s useful
- When deciding where to keep cash you won’t need for a few months.
- When savings rates and Treasury yields are close.
- When you move to a different state.
Who it’s for
- Savers in states with income tax, especially at higher rates.
- People with large cash balances looking for the best after-tax return.
- Anyone comparing T-bills, Treasury ETFs and savings accounts.
What to enter
| Input | What it means | Where to find it |
|---|---|---|
| Amount | The money you’re comparing | Your savings |
| Treasury yield | A T-bill’s investment rate or a fund’s 30-day SEC yield | TreasuryDirect, your broker, or Maxint Explore |
| Savings APY | The savings account’s annual percentage yield | The bank’s rate page |
| Federal tax bracket | Your top federal income tax rate | Last year’s tax return, or the IRS tax brackets |
| State and local income tax | Your top combined state and local rate | Your state’s tax tables |
How to use it
- Enter the amount, a Treasury yield and a savings APY.
- Choose your federal tax bracket and enter your state and local tax rate.
- Read which option keeps more after tax, and by how much.
- Check the savings APY needed to match the Treasury.
Understanding your results
- Treasury after tax = Treasury yield × (1 − federal rate).
- Savings after tax = savings APY × (1 − federal rate − state and local rate).
- Savings APY needed to match = Treasury after-tax yield ÷ (1 − federal rate − state and local rate).
A worked example
Suppose you have $50,000, a Treasury yields 3.80%, and a savings account pays 4.20% APY. You’re in the 22% federal bracket and pay 9.3% California income tax.
- Treasury after tax: 2.96%.
- Savings after tax: 2.89%.
- Result: the Treasury leaves about $39 more a year, even though its yield is lower.
- To match it, savings would need 4.31% APY.
- In Texas, with no state income tax, savings would keep 3.28% and come out ahead by $156 a year.
Common mistakes
- Comparing pre-tax yields when you pay state income tax.
- Using a T-bill’s discount rate instead of its investment rate.
- Forgetting that rates change. A savings APY can drop; a T-bill’s rate is fixed only until it matures.
- Assuming every fund dividend is exempt. Only the share from Treasury interest qualifies.
What to do with your result
- Compare Treasury ETF yields and today’s savings rates.
- For money with a fixed date, also consider a CD; the CD calculator shows what it would earn.
- Keep enough in savings for quick access, even if Treasuries pay a little more.
Limitations to keep in mind
The calculator applies flat tax rates to the interest. It doesn’t model the federal deduction for state taxes, the alternative minimum tax, the net investment income tax, state rules for fund dividends, or price changes if you sell before maturity. Yields change daily. This isn’t tax or investment advice.
Frequently asked questions
Why is Treasury interest exempt from state tax?
Federal law exempts interest on US government obligations, such as Treasury bills, notes and bonds, from state and local income taxes. It’s still subject to federal income tax.
Do Treasury ETFs get the same exemption?
Generally, the part of a fund’s dividends that comes from US Treasury interest can be exempt from state tax, and funds report that share each year. Some states only allow it if the fund holds a minimum share of US government obligations, so check your state’s rules.
What yield should I use for a T-bill?
Use its investment rate (also called the bond-equivalent yield), shown at auction results and by brokers. It’s more comparable to an APY than the discount rate. For a fund, use the 30-day SEC yield.
Is a Treasury always better in a high-tax state?
No. If the savings APY is high enough, it can still win. In our California example, savings would need 4.31% APY to match a 3.80% Treasury yield.
What if I live in a state with no income tax?
Then the exemption doesn’t help, and you can compare the yields directly. In our example, a 4.20% savings APY would leave $156 more a year on $50,000 than a 3.80% Treasury.
Are there other differences besides tax?
Yes. T-bills lock a rate until they mature, while savings rates can change. Savings is FDIC insured up to limits; Treasuries are backed by the US government. Selling a T-bill or ETF before maturity can mean a small gain or loss.
Related calculators
This calculator gives estimates for illustration, based on the figures you enter and the assumptions described on this page. It isn’t financial, tax or legal advice, an offer, or a guarantee of any outcome.