T-bill after-tax advantage by state (2026)
Because T-bill interest is exempt from state income tax, a 4.00% T-bill beats a 4.00% CD after tax in the 41 states (plus DC) that tax interest — by up to 0.53 percentage points in California, where a CD would need about 4.85% APY to match.
All 50 states + DC, ranked by after-tax edge
Tax rates as of tax year 2026 (top statutory marginal rates) · Sources: state revenue statutes as compiled by Tax Foundation, 2026; exemption per 31 U.S.C. § 3124. Benchmark: 4.00% nominal yield, 24% federal marginal rate. Computed by RungRate — see methodology.
| Rank | State | Top state rate (%) | T-bill after-tax yield (%) | CD after-tax yield (%) | T-bill edge (pp) | CD APY needed to match (%) |
|---|---|---|---|---|---|---|
| 1 | California | 13.30 | 3.04 | 2.51 | 0.53 | 4.85 |
| 2 | Hawaii | 11.00 | 3.04 | 2.60 | 0.44 | 4.68 |
| 3 | New York | 10.90 | 3.04 | 2.60 | 0.44 | 4.67 |
| 4 | District of Columbia | 10.75 | 3.04 | 2.61 | 0.43 | 4.66 |
| 5 | New Jersey | 10.75 | 3.04 | 2.61 | 0.43 | 4.66 |
| 6 | Oregon | 9.90 | 3.04 | 2.64 | 0.40 | 4.60 |
| 7 | Minnesota | 9.85 | 3.04 | 2.65 | 0.39 | 4.60 |
| 8 | Massachusetts | 9.00 | 3.04 | 2.68 | 0.36 | 4.54 |
| 9 | Vermont | 8.75 | 3.04 | 2.69 | 0.35 | 4.52 |
| 10 | Wisconsin | 7.65 | 3.04 | 2.73 | 0.31 | 4.45 |
| 11 | Maine | 7.15 | 3.04 | 2.75 | 0.29 | 4.42 |
| 12 | Connecticut | 6.99 | 3.04 | 2.76 | 0.28 | 4.41 |
| 13 | Delaware | 6.60 | 3.04 | 2.78 | 0.26 | 4.38 |
| 14 | Maryland | 6.50 | 3.04 | 2.78 | 0.26 | 4.37 |
| 15 | South Carolina | 6.00 | 3.04 | 2.80 | 0.24 | 4.34 |
| 16 | Rhode Island | 5.99 | 3.04 | 2.80 | 0.24 | 4.34 |
| 17 | New Mexico | 5.90 | 3.04 | 2.80 | 0.24 | 4.34 |
| 18 | Virginia | 5.75 | 3.04 | 2.81 | 0.23 | 4.33 |
| 19 | Montana | 5.65 | 3.04 | 2.81 | 0.23 | 4.32 |
| 20 | Kansas | 5.58 | 3.04 | 2.82 | 0.22 | 4.32 |
| 21 | Idaho | 5.30 | 3.04 | 2.83 | 0.21 | 4.30 |
| 22 | Georgia | 5.19 | 3.04 | 2.83 | 0.21 | 4.29 |
| 23 | Alabama | 5.00 | 3.04 | 2.84 | 0.20 | 4.28 |
| 24 | Illinois | 4.95 | 3.04 | 2.84 | 0.20 | 4.28 |
| 25 | West Virginia | 4.82 | 3.04 | 2.85 | 0.19 | 4.27 |
| 26 | Missouri | 4.70 | 3.04 | 2.85 | 0.19 | 4.26 |
| 27 | Nebraska | 4.55 | 3.04 | 2.86 | 0.18 | 4.25 |
| 28 | Oklahoma | 4.50 | 3.04 | 2.86 | 0.18 | 4.25 |
| 29 | Utah | 4.50 | 3.04 | 2.86 | 0.18 | 4.25 |
| 30 | Colorado | 4.40 | 3.04 | 2.86 | 0.18 | 4.25 |
| 31 | Michigan | 4.25 | 3.04 | 2.87 | 0.17 | 4.24 |
| 32 | Mississippi | 4.00 | 3.04 | 2.88 | 0.16 | 4.22 |
| 33 | North Carolina | 3.99 | 3.04 | 2.88 | 0.16 | 4.22 |
| 34 | Arkansas | 3.90 | 3.04 | 2.88 | 0.16 | 4.22 |
| 35 | Iowa | 3.80 | 3.04 | 2.89 | 0.15 | 4.21 |
| 36 | Kentucky | 3.50 | 3.04 | 2.90 | 0.14 | 4.19 |
| 37 | Pennsylvania | 3.07 | 3.04 | 2.92 | 0.12 | 4.17 |
| 38 | Louisiana | 3.00 | 3.04 | 2.92 | 0.12 | 4.16 |
| 39 | Indiana | 2.95 | 3.04 | 2.92 | 0.12 | 4.16 |
| 40 | Ohio | 2.75 | 3.04 | 2.93 | 0.11 | 4.15 |
| 41 | Arizona | 2.50 | 3.04 | 2.94 | 0.10 | 4.14 |
| 42 | North Dakota | 2.50 | 3.04 | 2.94 | 0.10 | 4.14 |
| 43 | Alaska | 0.00 | 3.04 | 3.04 | 0.00 | 4.00 |
| 44 | Florida | 0.00 | 3.04 | 3.04 | 0.00 | 4.00 |
| 45 | Nevada | 0.00 | 3.04 | 3.04 | 0.00 | 4.00 |
| 46 | New Hampshire | 0.00 | 3.04 | 3.04 | 0.00 | 4.00 |
| 47 | South Dakota | 0.00 | 3.04 | 3.04 | 0.00 | 4.00 |
| 48 | Tennessee | 0.00 | 3.04 | 3.04 | 0.00 | 4.00 |
| 49 | Texas | 0.00 | 3.04 | 3.04 | 0.00 | 4.00 |
| 50 | Washington | 0.00 | 3.04 | 3.04 | 0.00 | 4.00 |
| 51 | Wyoming | 0.00 | 3.04 | 3.04 | 0.00 | 4.00 |
Column definitions: T-bill after-tax yield = 4.00% × (1 − 0.24); CD after-tax yield = 4.00% × (1 − 0.24 − state rate); edge is the difference in percentage points (pp); CD APY needed = 4.00% × (1 − 0.24) ÷ (1 − 0.24 − state rate). The state-rate inputs are published as JSON at /data/state_tax_rates.json.
How to read this table
The ranking answers one question: given identical sticker yields, how much more does a T-bill leave in your pocket than a CD or savings account, purely because of the state-tax exemption? The "edge" column is that answer in percentage points of yield. Note that the edge itself does not depend on your federal bracket — federal tax hits both products equally — so 4.00% × your state marginal rate is the whole story. The final column flips the question around: it is the tax-equivalent APY a fully taxable CD must pay to tie the T-bill, and that figure does grow with your federal rate, because state tax stacks on top of it.
The table uses each state's top marginal rate to define the ceiling of the effect. If your income lands in a lower bracket of a graduated state, your personal edge shrinks proportionally: a New York saver at a 6% marginal state rate gets 0.24 pp on a 4.00% yield, not the 0.44 pp shown for the 10.9% top rate. Flat-tax states (Illinois, Massachusetts at its 5% base rate, North Carolina, and others) are closer to one-size-fits-all. Local income taxes are excluded — in NYC, Maryland counties, and parts of Ohio, Indiana, and Michigan, the true edge is larger than shown because the federal exemption covers local tax as well.
Two practical implications follow. First, in the nine no-tax states the entire comparison collapses to sticker yield, liquidity, and insurance mechanics — there is no tax reason to prefer a T-bill. Second, in states above roughly 5%, the exemption is frequently worth more than the spread between a competitive CD and a competitive T-bill, meaning the "lower-yielding" Treasury can be the higher-paying asset after tax. That inversion is exactly what the after-tax comparator tool is built to detect for your own rates, and the current yields table supplies the live starting point.
Worked example
An Oregon saver (9.9% top rate) in the 24% federal bracket compares a 4.00% CD with a 4.00% 26-week T-bill roll:
- CD after tax: 4.00% × (1 − 0.24 − 0.099) = 4.00% × 0.661 = 2.64%
- T-bill after tax: 4.00% × (1 − 0.24) = 3.04%
- Edge: 0.40 pp — the CD would need 4.00% × 0.76 ÷ 0.661 ≈ 4.60% APY to tie.
On a $50,000 emergency fund, that 0.40 pp is about $200 per year of after-tax interest — for holding an asset backed by the same federal government that insures the CD's bank via the FDIC.
Frequently asked questions
Why do T-bills beat CDs after tax in most states?
Interest on U.S. Treasury bills is exempt from state and local income tax under 31 U.S.C. § 3124, while CD and savings interest is fully state-taxable. At the same sticker yield, the T-bill therefore nets more in any state with an income tax — the higher the state rate, the bigger the gap.
How much more does a CD need to pay to match a T-bill in California?
At the 2026 top marginal rates (13.3% state, 24% federal benchmark), a CD needs about 4.85% APY to match a 4.00% T-bill after tax. The exact figure scales with your own marginal rates; the tax-equivalent-yield formula is on this page.
In which states is there no T-bill tax advantage?
Nine states levy no tax on interest income as of 2026: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. In those states a T-bill and a CD at the same yield net the same after tax, so the choice rests on liquidity, terms, and FDIC vs Treasury backing.
Does this table use my actual tax rate?
No — it uses each state's top statutory marginal rate for 2026 and a 24% federal benchmark to make rows comparable. Graduated-rate states tax lower incomes at lower rates, so your personal gap may be smaller. RungRate's after-tax comparator lets you enter your own marginal rates.
Do local income taxes change the ranking?
They can. NYC (up to 3.876%), Maryland counties (roughly 2.25%–3.3%), and some other localities tax interest on top of the state rate, and the Treasury exemption covers those local taxes too — widening the T-bill's edge beyond what this state-level table shows.