T-bill or CD: which pays more after state tax
A CD's interest is taxed by your state, a T-bill's is not. The calculator gives the CD rate that would leave you as much as a bill after tax, for your state, income and filing status.
A CD or savings account in New Jersey must pay
4.749 %
to match 4.351 % from a T-bill or savings bond, which New Jersey cannot tax.
| Federal marginal rate (2026 brackets) | 24 % |
| New Jersey marginal rate | 6.37 % |
| State and local tax saved per $10,000 a year | $27.72 |
Worked out by Radif Partners · How we calculate · rates read on treasurydirect.gov and fiscaldata.treasury.gov · not personal financial advice
To compare a Treasury bill with a CD, put both on an after-tax basis. Both pay interest taxed by the federal government, but only the CD pays state and local income tax: Treasury interest is exempt under 31 U.S.C. 3124. The CD rate that matches a bill is the bill yield × (1 − federal rate) ÷ (1 − federal rate − state rate). For a single filer in New Jersey with $150,000 of taxable income, the federal marginal rate is 24 % and the state rate 6.37 %, so the latest 26-week bill at 4.351 % is worth a CD paying 4.749 %. In Texas, which has no income tax, the two rates are compared directly. Two more points change the answer: a CD quotes an APY, compounded, while a bill quotes a simple annual rate, and a CD may be closed early only with the bank's penalty, while a bill can be sold at the market price. The calculator handles the tax part for any state.
The same bill in eight states
The table takes the latest 26-week bill, at 4.351 %, and a single filer with $150,000 of taxable income, in a 24 % federal bracket. The last column is how much higher a CD must pay to match the bill after tax.
| State | State marginal rate | CD rate that matches the bill | Extra the CD needs |
|---|---|---|---|
| New Jersey | 6.37 % | 4.749 % | 0.398 % |
| California | 9.30 % | 4.958 % | 0.607 % |
| New York | 5.90 % | 4.717 % | 0.366 % |
| Oregon | 9.90 % | 5.003 % | 0.652 % |
| Massachusetts | 5.00 % | 4.657 % | 0.306 % |
| Illinois | 4.95 % | 4.654 % | 0.303 % |
| Pennsylvania | 3.07 % | 4.534 % | 0.183 % |
| Texas | 0.00 % | 4.351 % | 0.000 % |
The gap grows with the state rate and with the bill yield. It shrinks as the federal rate rises, because a higher federal rate makes every dollar of state tax a smaller share of what is left. For a married couple in New Jersey with $300,000 of taxable income, the state rate is 6.37 % and the matching CD rate 4.749 %.
The matching CD rate for your state
A CD or savings account in California must pay
4.940 %
| Federal marginal rate (2026 brackets) | 22 % |
| California marginal rate (2025 schedule) | 9.30 % |
| State and local tax saved per $10,000 a year | $40.46 |
The formula
A bill yield y loses only federal tax f: what is left is y × (1 − f). A CD rate r loses federal and state tax s: r × (1 − f − s). Setting the two equal gives r = y × (1 − f) ÷ (1 − f − s). With a New Jersey state rate of 6.37 % and a 24 % federal rate, r = 4.351 % × 0.76 ÷ 0.6963 = 4.749 %. On $50,000 held for 26 weeks, the state tax the bill avoids is about $69.10. If you itemize and deduct state tax below the cap, the formula becomes r = y ÷ (1 − s), because the state tax itself reduces federal tax. Where a city or county also taxes interest, add its rate to s; the calculator has fields for New York City, the Portland area and other local taxes.
APY, investment rate and term
A bank quotes a CD with its annual percentage yield, which assumes the interest compounds for a year. A bill's investment rate is a simple annual rate for its term: a 26-week bill earns about half of it, paid at maturity. To compare a 26-week bill with a one-year CD, the bill's rate has to be compounded over two terms, which turns 4.351 % into about 4.398 %, on the assumption that the second bill pays the same rate. It may not: the next auction sets a new rate. A 52-week bill, at 4.616 % at its latest auction, locks the rate for a year like a one-year CD, and the Treasury computes its investment rate with semiannual compounding already built in.
Terms should match as well. A 13-week bill at 4.185 % compared with a five-year CD says little: the CD fixes a rate for five years, the bill for three months.
Getting the money out early
A CD closed before its term usually costs a penalty set by the bank, often a number of months of interest. A bill has no penalty, but in TreasuryDirect it cannot be sold: it must first be moved to a bank or broker, which sells it at the market price of the day. If rates have risen since you bought, that price can be a little below what the bill would be worth at maturity; if they have fallen, a little above. For short bills held at a broker the difference is usually small. Money that may be needed before maturity fits better in a short bill or in a CD with a light penalty.
Safety and access
A bill is a direct obligation of the United States. A CD at an insured bank is covered by federal deposit insurance up to the limits that apply to your accounts at that bank. Both can be held in a brokerage account; bills can also be bought directly in TreasuryDirect from $100 (TreasuryDirect, Treasury bills). Rates are on the T-bill rates page, and the state tax page gives the matching CD rate for every state at once.
Savings bonds in the same comparison
I bonds and EE bonds share the bill's exemption from state and local tax (31 U.S.C. 3124), so the same formula converts their rate into a CD rate. Their other rules differ: a savings bond cannot be cashed in its first year, loses three months of interest before five years, and lets you put off federal tax until you cash it. The I bonds page and the savings bond tax page cover those rules.