CD vs Treasury Bills 2026: After-Tax Yield Compared
Today's best 12-month CD pays 4.60% and the 52-week T-bill yields 4.32% - but T-bill interest skips state income tax. In a no-tax state the CD wins $21.84 on $10,000; in California the T-bill wins $20.94. Run your own numbers below.
Updated Nov 7, 2026
The rule that decides most of it: state income tax
Both CDs and T-bills pay interest taxed as ordinary income at your federal marginal rate - that part is a wash. The difference is the state: federal law (31 U.S.C. §3124) exempts Treasury interest from state and local income tax, while CD interest is taxed by your state in full. So the same two rates can flip winners depending on where you live:
| Your state | CD keeps | T-bill keeps | After-tax winner |
|---|---|---|---|
| Texas (no income tax) | $358.80 | $336.96 | CD by $21.84 |
| Illinois (4.95%) | $336.03 | $336.96 | T-bill by $0.93 |
| New York (5.85%) | $331.89 | $336.96 | T-bill by $5.07 |
| California (9.30%) | $316.02 | $336.96 | T-bill by $20.94 |
State rates are the marginal rate at $75,000 taxable income, single filer, from 2026 brackets; interest stacks on top of your other income, so the marginal rate is the right one to use. In a no-tax state the comparison is rate-vs-rate and the higher quote wins. The higher your state tax, the bigger the T-bill's edge.
Today's rates side by side
Best fundable standard CD APY among the 83 banks we track (checked Nov 7, 2026, $10,000 deposit) against the Treasury's daily bill rates (Nov 6, 2026). The last column is the tax-equivalent yield: the APY a CD must pay to tie the bill for a Californian in the 22% federal bracket.
| Term | Best tracked CD | T-bill | CD must beat (CA, 22% fed) |
|---|---|---|---|
| 3 months | 4.30% Popular Direct | 4.11% (13-week) | 4.67% |
| 6 months | 4.35% Popular Direct | 4.26% (26-week) | 4.84% |
| 12 months | 4.60% Sallie Mae | 4.32% (52-week) | 4.90% |
T-bill yields are the coupon-equivalent (investment) yield, the like-for-like quote against a CD's APY; the bank-discount rate the auctions lead with understates the return. Treasury refreshes these rates every business day - ours are as of Nov 6, 2026.
After tax on $10,000, 12 months, by state
Same deposit, same rates (4.60% CD vs 4.32% bill), same 22% federal bracket. The only thing changing is the state line on your return.
| State (marginal rate) | CD interest after tax | T-bill interest after tax | Winner |
|---|---|---|---|
| Texas — 0% | $358.80 (taxed 22.00%) | $336.96 (taxed 22.00%) | CD by $21.84 |
| Illinois — 4.95% | $336.03 (taxed 26.95%) | $336.96 (taxed 22.00%) | T-bill by $0.93 |
| New York — 5.85% | $331.89 (taxed 27.85%) | $336.96 (taxed 22.00%) | T-bill by $5.07 |
| California — 9.30% | $316.02 (taxed 31.30%) | $336.96 (taxed 22.00%) | T-bill by $20.94 |
Local income taxes (New York City, for example) widen the T-bill's edge further - Treasury interest is exempt from those too.
What today's T-bills are worth as a CD rate
The tax-equivalent yield: the CD APY that would leave you exactly as much after tax as each bill, at the 22% federal bracket. Compare these to the best tracked CD rates above, not to the raw bill yield.
| T-bill | Yield | 0% state | 4.95% state | 9.30% state | 13.3% state |
|---|---|---|---|---|---|
| 13-week | 4.11% | 4.11% | 4.39% | 4.67% | 4.95% |
| 26-week | 4.26% | 4.26% | 4.55% | 4.84% | 5.14% |
| 52-week | 4.32% | 4.32% | 4.61% | 4.90% | 5.21% |
In the 13.3% column (California's top bracket) the 52-week bill is worth a 5.21% CD - no tracked bank comes close. In a no-tax state the tax-equivalent yield is just the bill's own yield, and top CDs beat it.
The difference at $10K vs $100K
The tax gap scales with the deposit and with your bracket. At $100,000 in a high-tax state, picking the wrong side of this comparison costs real money every year.
| Deposit | Federal bracket | State | CD keeps | T-bill keeps | Winner |
|---|---|---|---|---|---|
| $10,000 | 22% | no income tax | $358.80 | $336.96 | CD by $21.84 |
| $10,000 | 22% | California 9.30% | $316.02 | $336.96 | T-bill by $20.94 |
| $100,000 | 24% | no income tax | $3,496.00 | $3,283.20 | CD by $212.80 |
| $100,000 | 24% | California 9.30% | $3,068.20 | $3,283.20 | T-bill by $215.00 |
When CDs win, when T-bills win
CDs win when…
- You're in a no- or low-tax state. No state tax means no T-bill exemption to pay for, and top CDs out-yield bills outright - today 4.60% vs 4.32% at 12 months.
- You want a locked rate past one year. Bills max out at 52 weeks; CDs lock a fixed APY for 2-5 years, useful if you expect rates to fall.
- You value simplicity. Open once, no auctions, no TreasuryDirect account, FDIC/NCUA insurance does the safety work under $250,000.
- You might need the money mid-term and picked a no-penalty CD - several online banks offer them, with no secondary-market price risk.
T-bills win when…
- You're in a high-tax state. The exemption is worth about your state marginal rate of the yield - 9.30% in California, 13.3% at the top bracket, plus city tax where it applies.
- You want liquidity. Bills sell any day on the secondary market; breaking a CD costs a penalty that can reach principal.
- You're over FDIC limits. Bills are direct federal obligations with no $250,000 cap to manage across banks.
- You want short terms. 4 to 17-week bills have no real CD equivalent, and auto-roll on TreasuryDirect approximates a ladder.
Either way, compare the after-tax number, not the headline. And if you split the difference, a CD ladder or rolling 4-week bills both keep cash freeing up on a schedule.
How to buy each
A CD (10 minutes, one bank)
- Pick the term and the best rate - the CD calculator lists every tracked bank's current card.
- Check the early-withdrawal penalty and minimum deposit before applying.
- Open online, fund by transfer, and note the maturity date so auto-renewal doesn't roll you into a worse rate.
A T-bill (weekly auctions)
- Open a free TreasuryDirect.gov account and link your bank (or use any brokerage).
- Place a non-competitive bid - $100 minimum, you get the auction's average yield. 13 and 26-week bills auction weekly; 52-week every four weeks.
- Optionally schedule auto-roll (up to two years) so each matured bill reinvests itself.
Tax-Equivalent Yield Formula
The CD APY that matches a T-bill after tax, once the T-bill's state-tax exemption is priced in.
CD APY = T-bill yield × (1 - federal) ÷ (1 - federal - state)Example:
A 4.32% 52-week T-bill, 22% federal bracket, California 9.30% state
Variables:
Keep = interest × (1 - tax rate)Example:
$10,000 for 12 months: 4.60% CD vs 4.32% T-bill, 22% federal, no state tax
Variables:
These formulas provide the mathematical foundation for the calculations. Actual results may vary based on rounding, compounding frequency, and specific lender policies.
CD vs Treasury bill FAQs
Taxes, safety, liquidity and how to buy - quick answers for choosing between CDs and T-bills.
Which pays more right now, CDs or Treasury bills?
Is Treasury bill interest really state-tax free?
What is a tax-equivalent yield?
Are Treasury bills safer than CDs?
Can I sell a T-bill or break a CD early?
How do I buy Treasury bills?
CD vs T-bill for an emergency fund?
Sources and how we calculate
CD growth is APY-consistent (A = P × (1 + APY)^t), the same convention as our CD calculator. T-bill interest uses the coupon-equivalent yield pro-rated by term, assuming reinvestment at the same yield for terms past one bill; constant rates are an illustration, not a forecast. Interest is taxed at the marginal federal plus (for CDs) state rate, because it stacks on top of other income. CD rates are the best fundable standard offers among the 83 banks we track, checked Nov 7, 2026; T-bill yields are the Treasury's daily rates as of Nov 6, 2026; state marginal rates come from 2026 brackets at $75,000 taxable income, single filer. Results are estimates, not tax advice or an offer from any bank or the Treasury.
- U.S. Treasury: Daily Treasury Bill Rates
- TreasuryDirect: How Treasury Bills Work
- IRS: Publication 550, Investment Income and Expenses
- 31 U.S.C. §3124: State and Local Tax Exemption
- FDIC: Deposit Insurance
- FDIC: National Rates and Rate Caps
Figures last checked on Nov 7, 2026. Read our calculation methodology for data sources and update schedule.