COMPARISON · MONEY · CASH YIELDS
A 4.00% APY high-yield savings account and 4.10% T-bills look like a coin flip — until taxes. In the 22% federal bracket with 5% state tax, the savings account keeps only 2.920% after tax ($292.00 a year on $10,000) while T-bill interest — exempt from state tax by federal law — keeps 3.198% ($319.80). T-bills win by $27.80. Enter your own rates, bracket, and state below — the winner flips more often than you’d think.
Enter the savings account APY, the T-bill yield, your federal bracket, and your state tax rate. The calculator computes what each side keeps after taxes on a like-for-like basis — state tax hits only the HYSA — and names the winner with the exact dollar gap on your balance.
HYSA after tax = APY × (1 − federal − state). T-bill after tax = yield × (1 − federal) — T-bill interest is exempt from state and local income tax under 31 U.S.C. §3124, so the state term drops out of the T-bill’s side. At the defaults: 4.00% × (1 − 0.22 − 0.05) = 2.920% for the HYSA, 4.10% × (1 − 0.22) = 3.198% for the T-bill. On $10,000 that is $292.00 vs $319.80 a year — T-bills win by 0.278 percentage points, $27.80.
Setup: $10,000 in cash, a 4.00% APY high-yield savings account, 4.10% T-bills, a 22% federal bracket, and 5% state tax.
The savings account’s real yield. The HYSA pays tax at both levels: 4.00% × (1 − 0.22 − 0.05) = 4.00% × 0.73 = 2.920% after tax, or $292.00 a year on $10,000. The state takes its bite on top of the federal one — every percentage point of state tax is a full point off the HYSA’s yield.
The T-bill’s real yield. T-bill interest skips state tax entirely: 4.10% × (1 − 0.22) = 4.10% × 0.78 = 3.198% after tax, or $319.80 a year. That 0.78 multiplier applies no matter which state you live in — the exemption is federal law, not a state perk.
The verdict. 3.198% − 2.920% = 0.278 percentage points; $319.80 − $292.00 = $27.80 a year on $10,000 — T-bills win. The tax-equivalent yield makes it one number: a 4.10% T-bill with 5% state tax equals a 4.32% HYSA after tax (4.10 ÷ 0.95) — anything paying less than 4.32% loses to the T-bill.
Branch — HYSA wins (4.50% HYSA vs 3.80% T-bill, 22% federal, 0% state): no state tax means no T-bill exemption edge: 4.50% × 0.78 = 3.510% ($351.00) vs 3.80% × 0.78 = 2.964% ($296.40) — the HYSA wins by 0.546 pp ($54.60). When the state term is zero, the headline rate decides and the state-tax trick vanishes.
Branch — high-state-tax flip (4.00% vs 4.10%, 22% federal, 9.3% California): the HYSA sinks to 4.00% × (1 − 0.22 − 0.093) = 2.748% ($274.80) while the T-bill holds 3.198% ($319.80) — T-bills win by 0.450 pp ($45.00). In high-tax states the exemption does most of the winning.
Branch — the tie (4.00% vs 4.00%, 22% federal, 0% state): both keep 4.00% × 0.78 = 3.120% ($312.00) — a dead heat. With no state tax and identical headline rates, there is no mathematical difference; pick on liquidity and convenience.
| Output | Formula | What it means |
|---|---|---|
| HYSA after-tax yield | APY × (1 − federal − state) | 2.920% at the defaults — what the savings account actually pays you after both tax levels. |
| T-bill after-tax yield | yield × (1 − federal) | 3.198% at the defaults — Treasury interest skips state tax (31 U.S.C. §3124), so only the federal bracket applies. |
| Tax-equivalent yield | T-bill yield ÷ (1 − state) | 4.32% at the defaults — the HYSA rate that would tie the T-bill after taxes. A shortcut for the whole comparison. |
| Yearly earnings each | balance × after-tax yield | $292.00 (HYSA) vs $319.80 (T-bill) at the defaults on $10,000. |
| Winner’s edge | T-bill after-tax − HYSA after-tax, in pp and dollars | 0.278 pp / $27.80 for T-bills at the defaults — the number to decide on. |
The math uses your marginal rates as flat rates — real brackets are progressive, so this slightly overstates the tax bite for most people; treat it as a comparison tool, not a tax filing. APY vs investment rate are different compounding conventions — the calculator compares them directly, which is the industry-standard shortcut (Treasury’s investment rate is already the savings-comparable figure). The T-bill yield locks at auction for the term; the HYSA rate can change tomorrow — today’s winner may not be next month’s. Short bills carry reinvestment risk: rolling 4-week bills means re-auctioning at unknown future rates. The state exemption covers the interest; if you sell a bill early in a brokerage, any market gain is a different tax story. This is educational math, not tax or investment advice.
Bright Side Kit. "T-Bills vs High-Yield Savings: After-Tax Cash Verdict 2026." https://brightoolbox.com/t-bills-vs-high-yield-savings/ Accessed October 23, 2026.Data sourcesFederal law — 31 U.S.C. §3124 — bars states and localities from taxing interest on U.S. government obligations, and Treasury bills count. You still owe federal income tax on the interest; the state simply cannot touch it. In a 9.3% state like California that exemption is worth roughly 0.38 percentage points on a 4.10% bill — the exact edge this calculator prices.
Two routes. TreasuryDirect (the government’s own site): buy at auction in $100 increments, no fees, but the interface is dated and you must hold to maturity or transfer out. Or a brokerage (Fidelity, Schwab, Vanguard): buy at auction with no fee, sell early on the secondary market if you must, and set up auto-roll so maturing bills automatically reinvest — the hands-off version. Most people who roll bills pick the brokerage.
Not as cleanly. A HYSA gives instant access with no penalty. A T-bill bought at TreasuryDirect must be held to maturity (as short as 4 weeks) or transferred to a broker to sell. In a brokerage you can sell early, but the price moves with rates — selling before maturity can mean a small loss. Rule of thumb: emergency cash stays in the HYSA; money with a known date goes to T-bills or a ladder of them.
Different safety, not more or less. FDIC covers $250,000 per depositor, per bank, per ownership category — above that at one bank, the excess is uninsured. T-bills are backed by the U.S. Treasury with no dollar cap, so a $1 million cash pile is fully backed in T-bills and needs four banks in HYSAs. For most balances under $250k the practical safety is identical.
On Form 1099-INT, like savings interest — and one quirk: T-bill interest is generally taxed in the year the bill matures, not the year you buy it, because bills pay nothing until maturity. Buy a 52-week bill in October 2026 and the interest lands on your 2027 return. HYSA interest is taxed in the year it is credited.
Match the term to when you need the money. Longer bills recently paid more (the 52-week auctioned at 4.616% investment rate vs 4.351% for the 26-week in October 2026) and lock the rate for the full term. Shorter bills mature sooner and let you reinvest — better if you think rates rise, worse if they fall. Laddering (splitting across terms) splits the difference.
Three cases: you live in a no-income-tax state (the T-bill’s exemption buys nothing), the HYSA’s rate beats the T-bill’s tax-equivalent yield (at the defaults, anything above 4.32% APY), or you need instant, penalty-free access — emergency funds belong in the HYSA regardless of the math. Our branch shows a 4.50% HYSA beating 3.80% T-bills by $54.60 when state tax is zero.
Enormously, because the exemption scales with your state rate. At 22% federal: California (9.3%) — T-bills win by 0.450 pp ($45.00) at the defaults; New York (6.85%) — T-bills win by roughly 0.381 pp ($38.10); Texas or Florida (0%) — the exemption disappears and 4.10% vs 4.00% is nearly a tie at 0.078 pp ($7.80). Enter your own state rate above — it is the single most decisive input.