Are Treasuries state-tax-free? (Yes — the edge over CDs)

It's the most overlooked factor when comparing safe yields: Treasury interest is exempt from state and local income tax. CD and savings-account interest is not. Two products can show the same headline rate and pay you very differently after taxes.

A worked example

Say a 1-year T-bill yields 3.84% and a 1-year CD yields 4.10%. The CD looks better. But if your state income tax is 6%, the CD's after-state yield is about 3.85%, while the T-bill keeps its full 3.84% — effectively a tie, and the T-bill is also free of credit risk and FDIC-limit concerns.

Who benefits most

• Residents of high-tax states (California, New York, and similar) see the biggest swing.
• Residents of no-income-tax states (Texas, Florida, and others) get no state benefit — for them the headline comparison stands.
• It applies to T-bills, T-notes, T-bonds, and I-Bonds; it does not apply to CDs, savings, or money-market deposit accounts.

Tbillery's comparison pages note this tax edge wherever a Treasury is stacked against a CD or savings account. Always confirm your own tax situation.

Build a CD/Treasury ladder around current rates.

Updated July 2026