The 60-second rule
Rate, then tax treatment, then the term. The CD’s 4.75% headline beats the T-bill’s 4.616% before tax — but the CD pays tax twice while the T-bill pays tax once. On $10,000 at 22% federal + 5% state: T-bill keeps $360.05 (3.600%), CD keeps $346.75 (3.468%), high-yield savings keeps $321.20 (3.212%), and the VMFXX-style money market fund keeps $280.32 (2.803%) — T-bills win by $13.30 (0.133 pp). The break-even rule: any 1-year CD above 4.93% beats T-bills at these tax rates. Savings and the fund lose on rate before tax treatment even enters — their fight is with each other, not with the T-bill.
The worked example, line by line
Setup: $10,000, a 4.616% T-bill (52-week, Sep 29, 2026 auction), a 4.75% CD (top 1-year, Bankrate Oct 11, 2026), 4.40% high-yield savings (top online, SwitchWize/WSJ Oct 2026), a 3.84% money market fund (VMFXX 7-day SEC yield, Oct 23, 2026), a 22% federal bracket, and a 5% state bracket.
Line 1 — the gross. T-bill: $10,000 × 4.616% = $461.60. CD: $475.00. Savings: $440.00. Fund: $384.00. Before tax the CD leads by $13.40 — the headline race belongs to the CD.
Line 2 — the tax. T-bill skips state tax: $461.60 × (1 − 0.22) = $360.05 (3.600% effective). The other three pay both: CD $475 × 0.73 = $346.75 (3.468%); savings $425 × 0.73 = $321.20 (3.212%); fund $384 × 0.73 = $280.32 (2.803%). The state tax costs the CD $23.75 — more than its $13.40 pre-tax lead. That is the entire duel.
Line 3 — the verdict. $360.05 > $346.75 > $321.20 > $280.32: T-bills first, the CD $13.30 behind, savings $38.85 behind the T-bill, and the fund $79.73 behind. The break-even CD rate is 4.616% × 0.78 ÷ 0.73 = 4.93% — any 1-year CD above it beats T-bills at these tax rates; nothing on the board clears it.
Branch — no-tax state (state 0%, everything else at default): the CD keeps $475 × 0.78 = $370.50 against the T-bill’s $360.05 — the CD wins by $10.45 (0.105 pp). Kill the state tax and the exemption has nothing to exempt; the higher headline rate wins outright. Savings keeps $343.20, the fund $299.52 — the bottom two stay the bottom two.
Branch — California (32% federal + 9.3% state): the T-bill still keeps $461.60 × 0.68 = $313.89 — California cannot touch it. The CD keeps $475 × 0.587 = $278.82; savings $258.28; the fund $225.41 — T-bills win by $35.06 (0.351 pp) over the CD. High combined brackets are where the exemption does its heaviest lifting.
Branch — 6-month term (26-week bill 4.372% vs 4.75% CD, pro-rated): the T-bill earns half a year at the 26-week rate: $10,000 × 4.372% ÷ 2 = $218.60 × 0.78 = $170.51. The CD earns $237.50 × 0.73 = $173.38 — the CD wins by $2.87 (0.029 pp). Shorter paper, smaller tax bill, and the CD’s rate lead fits inside the half-year — the crown flips on term alone.
Branch — Texas, 37% bracket (no state tax): T-bill: $461.60 × 0.63 = $290.81. CD: $475 × 0.63 = $299.25 — the CD wins by $8.44 (0.084 pp). Even at the top federal bracket, with no state tax the exemption has nothing to work with — headline rate decides again.
Branch — Treasury-only fund toggle (VUSXX 3.92%, state-exempt): the fund keeps $392 × 0.78 = $305.76 — a $25.44 improvement over the VMFXX-style $280.32, purely from the state exemption. It still trails savings ($321.20 stays ahead), the CD, and the T-bill. The toggle’s lesson is which fund, not fund vs bill.
Branch — the error case: set federal + state to 100% or more and the calculator refuses — combined marginal rates under 100% only, please. Real top combined rates land near 50%.
Output · formula · meaning
| Output | Formula | What it means |
|---|
| T-bill after tax | A × rate × (1 − federal) | $360.05 at the defaults — federal tax only; the state exemption (31 U.S.C. §3124) covers every dollar. |
| CD after tax | A × rate × (1 − federal − state) | $346.75 at the defaults — the higher headline rate, fully double-taxed. |
| Savings after tax | A × APY × (1 − federal − state) | $321.20 at the defaults — variable rate, full liquidity, full tax. |
| Fund after tax | A × yield × (1 − federal − state) | $280.32 at the defaults (VMFXX-style). Tick the Treasury-only box and it becomes A × 3.92% × (1 − federal) = $305.76. |
| Break-even CD rate | T-bill rate × (1 − fed) ÷ (1 − fed − state) | 4.93% at the defaults — any 1-year CD above this beats the T-bill after tax. |
| The ranking | sort the four after-tax keeps, descending | T-bill > CD > savings > fund at the defaults — the verdict line states the winner and the dollar gap. |
Who uses this
- The CD shopper staring at a 4.75% banner: enters their state rate, watches the T-bill overtake it, and learns the 4.93% break-even — now they know the exact rate that would change their mind.
- The high-tax-state saver in California or New York: plugs in their combined bracket, sees the T-bill’s edge widen to $35+ on $10,000, and understands why Treasury paper is a tax-state strategy, not just a rate.
- The no-tax-state saver in Texas or Florida: runs the no-tax preset, watches the CD flip to the lead, and stops chasing T-bills that cannot help them — the exemption has nothing to exempt at 0% state.
- The emergency-fund holder weighing liquidity against yield: savings pays less but redeems instantly with no maturity decision; the CD locks the money; the T-bill must be held or sold. The dollar gaps price that convenience.
Accuracy & limitations
The math treats all four as simple interest over the term — APY compounding nuances on the CD and savings are not modeled, which costs at most a few dollars on $10,000. The 7-day SEC yield is a snapshot: it moves daily with short-term rates, so the fund’s position drifts between T-bill auctions. High-yield savings rates are variable and can change at any time; the 4.40% default is a representative top online rate (Bankrate, October 2026), not a promise. The fund calculation follows the run-187 page’s exact treatment: the default VMFXX-style fund pays federal + state on all its income, and the toggle models a Treasury-only fund (VUSXX, 100% state-exempt in 2025) — check your fund’s annual tax supplement for its real exempt share, and note California, Connecticut, and New York require 50%+ in government obligations at each quarter-end before any exemption applies. FDIC insurance: CDs and savings are FDIC-insured to $250,000 per depositor; money market funds are not FDIC-insured (SIPC at brokerages covers broker failure, not investment loss); T-bills are direct U.S. Treasury obligations. Tax timing: T-bill interest is taxed in the year the bill matures or is sold; CD interest is taxed yearly as it accrues. It models marginal tax rates only, not deductions or phaseouts, and it does not model inflation. This is educational math, not tax or investment advice.
Cite this calculatorBright Side Kit. “Best Place for Cash 2026: 4-Way After-Tax Showdown.”
brightoolbox.com, 2026.
Bright Side Kit. "Best Place for Cash 2026: 4-Way After-Tax Showdown." https://brightoolbox.com/best-place-for-cash-2026/ Accessed October 23, 2026.Data sources- U.S. Treasury auction results, September 29, 2026 — 52-week bill 4.616% investment rate.
- U.S. Treasury auction results, October 19, 2026 — 26-week bill 4.372% investment rate.
- Bankrate, October 11, 2026 — top 1-year CD 4.75% APY.
- SwitchWize Savings Rate Watch, October 2026 (read Oct 23, 2026) — best single high-yield savings APY 4.40% (Pibank, no minimum or requirements); WSJ, Oct 23, 2026 — Pibank 4.40%.
- Money-market yield trackers (money8020 / yieldfinder), checked October 23, 2026 — VMFXX 7-day SEC yield 3.84%; VUSXX 3.92%.
- 31 U.S.C. §3124 — interest on U.S. obligations exempt from state and local income tax.
- Vanguard 2025 tax supplement — VMFXX: 66.61% of income from U.S. government obligations; VUSXX: 100%.
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Frequently asked questions
Why does the T-bill beat the CD when the CD pays a higher rate?
The CD’s 4.75% beats the T-bill’s 4.616% before tax — by $13.40 on $10,000. But the CD’s interest is taxed at federal plus state ($23.75 of state tax at 5%), while the T-bill’s interest is exempt from state tax under 31 U.S.C. §3124. After tax: $360.05 vs $346.75. The state tax bill is bigger than the rate lead — that is the entire duel.
What is the break-even CD rate?
The CD yield that would exactly match the T-bill after tax: T-bill rate × (1 − federal) ÷ (1 − federal − state). At the defaults (4.616% bill, 22% + 5%) that is 4.93% — any 1-year CD above 4.93% beats T-bills at these tax rates. Raise your state rate and the break-even climbs with it. Rule-of-thumb version: a bank rate’s tax-equivalent yield is the bank rate × (1 − your state tax) — compare it straight to the T-bill rate. At 5% state the CD’s 4.75% is worth 4.5125% and savings’ 4.40% is worth 4.18%, both short of 4.616%.
Why does the money market fund finish last?
Two strikes. First, its 3.84% 7-day SEC yield is the lowest headline rate on the board. Second, like the CD and savings, its income is taxed at federal plus state — $384 × 0.73 = $280.32 kept. It keeps $79.73 less than the T-bill on $10,000. The fund’s case is liquidity (T+1 redemption, no maturity decision), not yield.
What does the Treasury-only fund toggle do?
It swaps the VMFXX-style fund (3.84%, taxed at federal + state) for a VUSXX-style Treasury-only fund at 3.92%, taxed at federal only — VUSXX was 100% state-exempt in 2025. It keeps $305.76 instead of $280.32: a $25.44 improvement — still $15.44 short of savings ($321.20), and well short of the CD and the T-bill at the defaults.
Is my cash FDIC-insured in each of these?
CDs and high-yield savings: yes — FDIC-insured to $250,000 per depositor, per bank. Money market funds: no — they are not FDIC-insured; at a brokerage they carry SIPC coverage, which protects against broker failure, not investment losses. T-bills: direct U.S. Treasury obligations — the benchmark everything else is measured against.
When does the CD win?
Whenever the state tax is too small to erase its rate lead — in a no-income-tax state the T-bill’s advantage disappears entirely: the CD keeps $370.50 vs $360.05 and wins by $10.45; in Texas at the 37% bracket it wins by $8.44; and at a 6-month term the CD’s pro-rated $173.38 edges the 26-week bill’s $170.51. Try the presets above — the crown changes hands.
Is the high-yield savings rate locked like the CD?
No. A CD locks its rate for the term; a savings account’s APY is variable and the bank can change it at any time — usually within days of a Fed move. The 4.40% default is a representative top online rate from Bankrate, October 2026, not a promise. What you are buying with the lower rate is instant liquidity: no term, no early-withdrawal penalty, no maturity decision.
How is each of these taxed?
Bank and fund interest arrives on Form 1099-INT (fund income is often reported on 1099-DIV — same tax math, different form). Timing differs: T-bill interest is taxed in the year the bill matures or is sold; CD interest is taxed yearly as it accrues, even if you cannot touch the money. The calculator models marginal rates only — it is educational math, not tax advice.