T-Bills Beat Savings After Tax? November 2026 Math

Here is the direct answer: a Treasury bill often beats a high-yield savings account after tax, even when its headline rate looks lower — but only if you pay state income tax, and only if you compare after-tax numbers instead of advertised rates. T-bill interest is exempt from state and local income tax. Savings account interest is not. That one difference is worth about $55 a year on every $25,000 at a 4.40% rate in a 5% state tax bracket, and it grows with your balance and your state rate.

That does not make T-bills the right home for all your cash. They lock your money up until maturity (or until you sell), their rate resets every time you roll into a new bill, and in a state with no income tax the whole advantage disappears. This article uses the latest auction results from late October 2026, works the after-tax math at three balances, shows you the break-even formula so you can run your own numbers, and walks through how to actually buy a bill without paying a broker a cent.

One clarification on language first. T-bill interest is not “passive income” in the sense of money that arrives while you sleep forever. It is interest on cash you already have, for a fixed term, at a rate that changes. Treat it as the boring, reliable tier of your cash plan — the money that earns a little extra while it waits for a known date — not as a wealth strategy on its own.

What T-bills paid at the last auctions

Treasury bills are short-term US government debt, sold at a discount. You pay less than face value today and receive the full face value at maturity. The gap is your interest. There is no monthly coupon, no dividend, and no compounding inside a single bill — the return is the discount.

At the most recent auctions before this article was written, on October 26–29, 2026, the investment rates — the bond-equivalent yields you can compare most directly with a savings APY — were:

Two things to notice. First, longer bills paid more in late October — the curve sloped upward from about 3.98% to 4.50%. Second, these rates move every week. A 52-week bill locks its rate for a year; a 4-week bill gives you a new rate 13 times a year. If you quote a T-bill rate to someone next month, quote the auction date with it, or the number is already stale.

For comparison, the best-known high-yield savings headlines at the end of October 2026 came with fine print that matters. Axos ONE advertised up to 5.00% APY, but only for new customers for their first six months and with a linked checking bundle and deposit conditions. Go2bank advertised up to 4.50%, but only on vault balances up to $5,000 with an active checking account. SoFi advertised up to 4.40%, but that included a 1.10% boost for up to six months on top of a 3.30% base rate, for new accounts with eligible direct deposit. None of those headlines is fake. All of them are conditional in ways a T-bill rate is not.

The after-tax math, worked honestly

Assume you are in the 22% federal bracket and your state taxes interest at 5%. Take $25,000 for one year, and for a clean comparison, put both options at the same 4.40% rate first:

Same rate, $55 more in your pocket from the T-bill, purely because the state cannot tax it. Now use the real late-October numbers: a 52-week bill at 4.496% against a savings account at 4.40% APY on the same $25,000:

The gap widens to about $73.72, because the T-bill both paid a slightly higher rate and skipped the state tax. Scale it up and the state-tax saving alone — before any rate difference — is $110 a year on $50,000 at 4.40% in a 5% state, and $220 a year on $100,000.

Here is the formula that lets you test any pairing, without trusting a listicle:

T-bill wins after tax when: T-bill rate > savings APY × (1 − federal rate − state rate) ÷ (1 − federal rate)

At a 22% federal rate and a 5% state rate, that multiplier is 0.73 ÷ 0.78 = 0.9359. So a savings account at 4.40% APY is beaten after tax by any T-bill above 4.40% × 0.9359 = 4.12%. Every bill term in the late-October table cleared that bar. In a state with no income tax, the multiplier is 1.0 and the higher rate simply wins — no adjustment needed. In a hypothetical 10% state bracket at the same federal rate, the multiplier drops to 0.68 ÷ 0.78 = 0.8718, and a T-bill at just 3.84% would beat a 4.40% savings account after tax. Run your own bracket through that formula before you move money; the answer flips with your state.

A note on precision, because it matters here. A T-bill investment rate is not exactly an APY. An APY includes compounding; a single bill does not compound until you reinvest the proceeds. The comparison above treats them as close enough for a one-year decision, which is standard practice, but if you roll 13-week bills four times at the same rate, your effective annual return will be slightly higher than the single-bill rate because each quarter’s interest can itself be reinvested. That only strengthens the T-bill side of the comparison, slightly.

When the savings account still wins

T-bills win the tax argument. They lose several practical arguments, and you should know all of them before you move your emergency fund.

You might need the money tomorrow. A savings account pays out same-day or next-day. A T-bill pays at maturity. You can sell a bill early through a broker, but the price then depends on current rates — if rates rose since you bought, you can sell for less than you paid, and the tax treatment of an early sale is messier than holding to maturity. Money you might need this month belongs in savings, full stop.

You live in a no-income-tax state. With no state tax to skip, the exemption is worth exactly zero. Compare headline rates directly, and favor whichever pays more with the access you need.

The savings rate is genuinely higher, after the fine print. A 5.00% promotional APY for six months, even with a drop afterward, can beat a 4.50% T-bill over a single year if you actually qualify for the full period and move the money when the promo ends. The trap is not the promo itself; it is forgetting the end date and drifting for months at the base rate. If you use promos, set the calendar reminder the day you open the account.

You value simplicity over $55. Some people will read the table above, see $55 on $25,000, and decide that one more account, one more login, and one more tax form is not worth it. That is a reasonable decision, especially at smaller balances. The T-bill advantage is real, but it is not life-changing money at $5,000 or $10,000. At $100,000, it is $220 a year for the same risk — and at that point simplicity starts to look expensive.

How to build a T-bill ladder

A ladder solves the lock-up problem by staggering maturities so money frees up on a schedule. Two versions cover most people:

The 4-week weekly ladder, for money you want back soon. Split your cash into four parts. Buy a 4-week bill each week for four weeks. From week five onward, one bill matures every week, and you either spend it or roll it into a new 4-week bill. You never wait more than seven days for a chunk of cash, and you pick up the state-tax exemption on all of it.

The 13-week monthly ladder, for money with a known date. Split your cash into three parts. Buy a 13-week bill once a month for three months. From month four onward, one bill matures every month. This fits quarterly tax payments, a planned purchase in six months, or a tax refund you want to park until next year’s filing season. The 26-week and 52-week bills work the same way with fewer moving parts and less frequent decisions — buy a 52-week bill for money you genuinely will not touch for a year.

Do not ladder money you cannot afford to wait for. A ladder improves access; it does not create instant access. Keep at least one month of essential spending in a savings account you can reach today, and ladder the rest.

How to buy one, step by step

You have three routes, and the cheapest is the government’s own portal:

TreasuryDirect (no fees, no broker). Open a free account at TreasuryDirect.gov with your Social Security number, link a US bank account in your name, and go to BuyDirect. Pick Bills and the term you want, enter the face value — minimum $100, in $100 increments, up to $10 million per auction for a non-competitive bid — and choose your funding source. A non-competitive bid means you accept whatever rate the auction sets; in exchange, your order is guaranteed to be filled. Auction results post after 5 p.m. Eastern on auction day, and the money needs to be in your bank account before the issue date. One quirk to know: TreasuryDirect requires you to hold a new marketable security for 45 calendar days before transferring it out, though reinvestments are exempt. That matters if you planned to move a bill to a broker quickly.

A brokerage account. Most major brokerages let you buy at auction with the same $100 minimum, or buy existing bills on the secondary market immediately at a quoted price. The secondary market is useful when you want a specific maturity date that the next auction does not offer, but you pay the market price, which may be slightly above or below what an auction would have given you. If you already keep your investments at a brokerage, this route keeps everything in one login and avoids the TreasuryDirect transfer hold.

A Treasury money market fund. Funds that hold very short-term Treasuries give you same-day access like a savings account, with most of the state-tax benefit passed through. The key word is “most”: the state-tax exemption applies in proportion to the fund’s holdings in US government obligations, which varies by fund and by year. Check the fund’s published percentage of income from US government obligations before you assume the full exemption. A fund charging a higher expense ratio on identical underlying bills will also show a slightly lower yield — fees are the one thing in this whole comparison that is entirely under your control.

Whichever route you pick, the tax paperwork is the same shape: you will receive a 1099-INT reporting the interest, taxed federally in the year it is earned, exempt from state and local tax. Keep the auction confirmation with your tax records, and if you sell early, keep the sale confirmation too — your tax preparer will need both.

The risks nobody puts in the headline

T-bills are backed by the full faith and credit of the United States, which is why they are treated as the safest cash parking available. That does not mean they are risk-free in every sense that matters to you.

Reinvestment risk is the big one. A 4-week bill that pays 3.98% today might pay 3.50% or 4.50% at the next auction. If the Federal Reserve cuts rates — and the October 28, 2026 decision to hold at 3.75%–4.00% came with two officials dissenting in favor of a hike, so the direction is genuinely uncertain — your rolled-over bills will follow rates down. A 52-week bill locks today’s rate for a year, which is protection if rates fall and a missed opportunity if they rise. There is no version of this choice that wins in both directions.

Inflation risk is quieter. At 4.50%, your cash earns more than the 3.6% September PCE inflation reading reported in late October, but only just, and only before federal tax. After a 22% federal tax bite, that 4.50% becomes about 3.51% — roughly keeping pace with inflation, not beating it by much. T-bills preserve purchasing power reasonably well. They do not grow wealth the way investments with real risk do. Do not mistake a good cash yield for a retirement plan.

Opportunity cost is real. Money parked in T-bills for a year is money not invested elsewhere. If your time horizon is years rather than months, the after-tax T-bill advantage over savings is small compared with the long-run difference between cash and a diversified portfolio. Use T-bills for cash with a date attached, not for money you will not need for a decade.

A simple decision rule

If you pay state income tax, have cash you will not need for at least a month, and hold at least $25,000 of it, run the break-even formula with your own bracket and compare the latest auction rate with your savings APY after its promo period. If the T-bill clears the bar, ladder it. If you need instant access, live in a no-tax state, or hold a small balance, keep the savings account and spend the effort elsewhere — the extra yield is not worth the complexity at that scale.

For freelancers in particular, one use case stands out: quarterly tax money. If you set aside 25–30% of each client payment for taxes, that money sits idle for up to three months between payments. A 13-week ladder turns that waiting period into state-tax-free interest, and the maturity schedule lines up neatly with the quarterly payment dates. It is one of the few places where the T-bill structure fits a freelancer’s cash flow almost exactly, rather than approximately.

Frequently Asked Questions

Are Treasury bills FDIC-insured?

No, and they do not need to be. FDIC insurance covers bank deposits up to $250,000 per depositor, per bank, per ownership category. T-bills are direct obligations of the US government, backed by its full faith and credit, which is a different and stronger form of backing for this purpose.

What is the minimum amount to buy a T-bill?

$100 of face value, in $100 increments, through TreasuryDirect or most brokerages. You pay slightly less than face value — the discount is your interest — so a $10,000 bill costs you something like $9,566 at a 4.496% rate, not $10,000.

Do I pay state tax on T-bill interest?

No. Interest on US Treasury securities is exempt from state and local income tax under federal law, though it is still subject to federal income tax. This is the entire basis of the after-tax advantage described in this article.

Can I sell a T-bill before it matures?

Yes, through a broker on the secondary market, but the price depends on current interest rates. If rates have risen since you bought, you may sell for less than you paid. Through TreasuryDirect, you must hold a new bill for 45 days before transferring it out.

How often do T-bill rates change?

Every auction. Most bill terms auction weekly — 13-week and 26-week bills typically on Mondays, 4-week and 8-week bills typically on Thursdays — and the 52-week bill every four weeks. Your rate is set at the auction where you buy, not when you decide to buy.

Is a Treasury money market fund the same as owning T-bills?

Not exactly. A fund gives you same-day access and professional management, but charges an expense ratio, and its state-tax exemption applies only in proportion to its holdings in US government obligations. Check the fund’s published government-obligations percentage each year before assuming the full exemption.

This article is general information, not financial, investment, or tax advice. Rates are from the Treasury auctions of October 26–29, 2026, as reported in the sources below; auction rates change weekly, so check the latest results before buying. High-yield savings rates cited are from October 30–31, 2026 snapshots and are variable and conditional — verify current terms with the bank. Sources: latest T-bill auction rates and Treasury’s guide to buying marketable securities. For context on the savings accounts mentioned, see the high-yield savings catch for freelancers and high-yield savings rates after the Fed hike.