CD vs Treasury Bills (2026): Compare Yield, Taxes and Liquidity
CD vs Treasury bills (2026): compare yield, state taxes, liquidity and laddering with your own break-even math.
A short-term US government debt security sold at a discount and redeemed at face value. Interest is the difference between purchase and redemption price.
Example: Enter the current auction or secondary-market yield and maturity to model the proceeds.
Interest from US Treasury securities is generally exempt from state and local income tax; federal tax still applies. Confirm treatment with current tax guidance.
Example: Compare a Treasury yield and a CD APY after your federal and state marginal rates.
The US Treasury purchase platform at treasurydirect.gov. Review current account, auction, transfer and reinvestment rules before buying.
Example: Use TreasuryDirect or a brokerage and confirm settlement and reinvestment options for the security you choose.
T-bills and CDs can have different yields, taxes and access rules. Compare the current issuer or auction disclosure, your state tax treatment, term and liquidity before choosing.
Head-to-head: $10,000 for 12 months (2026)
- Enter the current 52-week T-bill yield and calculate its proceeds under your federal tax assumption; Treasury interest is generally exempt from state income tax.
- Enter the current 12-month CD APY and early-withdrawal terms; compare its after-tax proceeds with the T-bill calculation.
- The better product depends on current yields, your federal and state tax rates, fees and how soon you need the cash.
- Use the break-even formula with your own state rate; do not reuse a historical yield snapshot.
Beyond yield: 3 reasons to prefer T-bills
- Liquidity. T-bills trade on the secondary market — sell anytime for current market price (small bid/ask). CDs are locked until maturity unless you pay the EWP.
- No bank credit risk. T-bills are backed by the US government; CDs depend on FDIC insurance which caps at $250K/depositor/bank.
- Laddering is simpler. T-bill ladders use standard maturity dates (every 4, 8, 13, 17, 26, 52 weeks) and reinvest automatically on TreasuryDirect.
3 reasons to prefer CDs
- CDs may offer a higher headline yield for some terms, but the current offer and your state-tax treatment determine the result.
- Set-and-forget. The bank credits interest automatically; T-bills require either manual reinvest or a brokerage auto-roll feature.
- Local relationship. If you bank where you mortgage, a CD can build relationship discounts. T-bills are anonymous transactions with the Treasury.
The state-tax math is the whole game
Use the formula: T-bill after-tax yield = T-bill APY × (1 − federal rate). CD after-tax yield = CD APY × (1 − federal rate − state rate). Set them equal, solve for the break-even CD rate: CD-needed = T-bill × (1 − fed) / (1 − fed − state).
Insert the current T-bill yield, CD APY and your marginal tax rates into the formula above. The break-even changes whenever yields or tax rules change.
Recommended split
A split depends on current yields, state taxes, liquidity and the dates when you need the cash. Compare T-bills, CDs and savings products with the current disclosures and your own marginal tax rate.
Frequently asked questions
Are T-bill yields the same as APY?
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Are T-bills FDIC-insured?
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Can I buy T-bills inside an IRA?
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How often can I roll T-bills?
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Is the T-bill secondary market real for retail investors?
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Sources & further reading
Plug in your own amounts with our free calculators.