How does the Treasury bill versus CD comparison work?
This calculator applies user-entered marginal tax rates to two user-entered annualized yields. It models Treasury bill interest as subject to federal income tax and exempt from state and local income taxes; it models CD interest as subject to both entered federal and combined state/local rates. The result is a simplified comparison, not a tax calculation or current rate quote.
For each instrument, the calculator multiplies the entered annualized yield by one minus the assumed applicable tax rates. It then multiplies that after-tax yield by the comparison amount to show estimated annual interest dollars. Example: with a 24% federal rate, 5% state/local rate, a 4.5% bill yield, and a 4.4% CD yield, the modeled bill yield is 3.42% and the CD yield is 3.124%. On $10,000, those are $342 and $312.40 respectively under this simplified one-year arithmetic. The example values are inputs, not market observations.
The IRS says interest from Treasury bills is federally taxable and exempt from state and local income taxes. TreasuryDirect describes bill interest as the difference between purchase price and face value at maturity. IRS guidance generally treats interest received or credited and available to withdraw as taxable; CD reporting and timing can depend on its terms, including longer-maturity CDs subject to original issue discount rules. These sources support the general comparison, but an individual's state rules, account type, tax status, and CD terms may change the result.
Primary sources checked 2026-11-03: IRS Topic 403, Interest Received; IRS Publication 550 (2025), Investment Income and Expenses; TreasuryDirect, Tax Forms and Withholding.
For a meaningful comparison, use yields for similar periods and on the same annualized basis. A bill's discount rate is not automatically the same measure as a CD's APY; use a Treasury investment-rate or equivalent annualized measure when available. This page does not derive yields from bill prices or CD compounding schedules. It also leaves out fees, minimum balances, early withdrawal penalties, reinvestment rates, tax deductions, progressive brackets, and the timing of interest recognition. Review the security disclosure, CD account agreement, and applicable tax guidance before relying on a comparison.
Frequently asked questions
Why is the state/local rate applied only to the CD?
Federal tax guidance says interest from U.S. Treasury obligations is exempt from state and local income taxes. CD interest is generally taxable interest, but local rules and account circumstances can vary. Verify how your own jurisdiction treats the income.
Can I enter a Treasury bill discount rate?
Use an annualized investment-rate or equivalent yield that is comparable with the CD yield. A discount rate uses a different basis and can make the comparison misleading.
Does the calculator determine my tax rate?
No. You enter the marginal rates. The tool does not calculate taxable income, bracket interactions, deductions, credits, or tax liability.
Does this include CD compounding or early withdrawal?
No. It applies a one-year yield arithmetic model and does not inspect the deposit agreement, compounding convention, fees, or early-withdrawal terms.