CD Comparison Author: Hans Goldstein, NPN 20602398 Last updated: 2026-06-27

CD vs Treasury Bills (2026) - Short Money Yield + Tax Showdown

TL;DR: T-bills from 4 weeks to 52 weeks yield 4.40-4.60% right now and are exempt from state and local income tax. Short CDs yield 4.50-5.10% but get hit with state tax. For a Texas resident with $50K, the CD wins by 30-50 bps. For a California resident with $250K, the T-bill wins on after-tax basis - and gives you weekly liquidity instead of an early-withdrawal penalty.

Short-end yields - the 4-week, 13-week, 26-week, 52-week T-bill, and the matching 3-month to 12-month CDs - sit within 50 basis points of each other in 2026. That makes the decision feel close. It isn't.

T-bills are state-tax-exempt, can be bought directly from TreasuryDirect.gov at zero cost, and reset their yield every 4 weeks at auction. CDs are state-taxable, have an early-withdrawal penalty if you need the cash, and lock the rate for the term. For idle business cash, emergency funds over $100K, or short-horizon savings (3-12 months), the T-bill is usually the cleaner instrument. CDs win for tax-free states and for sub-$50K savers who want one-click simplicity.

Side-by-side comparison

Dimension	CD	Treasury Bills (4wk-52wk)
Current yield (2026)	~4.50-5.10%	~4.40-4.60%
Term options	3mo, 6mo, 9mo, 12mo	4wk, 8wk, 13wk, 17wk, 26wk, 52wk
Federal tax	Taxable as ordinary income	Taxable as ordinary income
State tax	Fully taxable	Exempt under 31 USC 3124
Default risk	FDIC to $250K per depositor per bank	U.S. Treasury direct obligation
Early access	Penalty: 1-3 months of interest	Sell on secondary market - price near par for short maturities
Minimum	$500-$1,000	$100
Purchase venue	Bank, credit union, brokerage	TreasuryDirect.gov or brokerage
Auto-reinvest	Manual rollover required	Auto-reinvest available at TreasuryDirect
Discount or coupon	Interest at maturity	Sold at discount, redeemed at face
Best for	Sub-$100K, no-tax states	Six-figure cash, high-tax states, business reserves

When CDs win

You live in Florida, Texas, Nevada, Tennessee, Washington, Wyoming, South Dakota, Alaska, or New Hampshire. No state tax exemption to capture - just take the higher headline yield.
Your bank is paying a promotional rate. Bank promo CDs (12-month at 5.10-5.25%) routinely beat T-bills by 50-75 bps. Stack the promo if you're under $250K.
You want set-and-forget for one year. A 12-month CD auto-matures - you don't have to think about it. T-bills require rolling every 4-52 weeks unless you enable auto-reinvest.
You're under $50K and value simplicity. The state-tax savings on $50K at 4.5% in CA is about $232/year. Not nothing, but if a brokerage account is friction, the CD is fine.
You want full FDIC protection on your primary checking-adjacent funds. Same-bank CDs roll into your existing account on maturity.

When Treasury Bills (4wk-52wk) wins

You live in California, New York, Oregon, New Jersey, Hawaii, or Minnesota. The state-tax exemption is worth 30-70 bps in after-tax yield - usually enough to flip the comparison.
You have idle business cash that might need to deploy on short notice. T-bills are sellable any business day at near-par. CDs lock you in.
You're parking more than $250,000. FDIC caps at $250K per bank. T-bills have unlimited backing.
You want to ladder weekly or monthly maturities. 4-week T-bill ladders are how Treasury operations desks manage cash. Bank CDs don't offer that granularity.
You're in the top federal bracket plus a high state tax bracket. The total-tax drag on CD interest erodes most of the headline advantage.

Worked example: $250,000 over the planning horizon

You're a New York City resident with $250,000 in idle cash you'll deploy in 9-12 months. NYC residents face federal + NY state + NYC local income tax. Top combined marginal rate on interest is around 49% (37% fed + 10.9% NY state + 3.876% NYC).

Option A: 12-month CD at 5.00%.
Gross interest: $12,500. Combined tax (federal 37% + state/local 14.78%): $6,472. After-tax: $6,028.

Option B: 52-week T-bill at 4.55%.
Gross interest: $11,375. Federal tax 37%: $4,209. State/local tax: $0. After-tax: $7,166.

The T-bill wins by $1,138 - despite being 45 bps lower on headline. And the T-bill lets you exit at any weekly secondary auction with minimal mark-to-market loss.

Flip to Houston: same 5.00% CD vs 4.55% T-bill, no state tax. CD: $12,500 gross, $7,875 after federal. T-bill: $11,375 gross, $7,166 after federal. CD wins by $709. Two identical investors, opposite optimal answer.

Tax implications

Both are taxable federally as ordinary income. Both report on Form 1099-INT. The difference is the state-tax line: CDs are fully state-taxable, T-bills are state-tax-exempt under 31 USC 3124. This is a federal statute - it cannot be overridden by state law.

For T-bills bought at a discount, the difference between purchase price and face value is treated as interest income (not capital gain) for federal purposes. Your brokerage or TreasuryDirect will issue a 1099-INT for the discount accrued in the tax year of maturity.

For inside an IRA or 401(k), the state-tax exemption is moot - tax-deferred wrappers ignore the difference. T-bills inside a tax-deferred account are essentially equivalent to a CD on a yield basis. Use T-bills in a taxable brokerage where the exemption actually delivers value.

Frequently Asked Questions

Are T-bills riskier than CDs?

No. Both are essentially default-free. T-bills are direct U.S. Treasury obligations - the safest debt instrument in the world. CDs under $250K are FDIC-insured by an agency backed by the full faith and credit of the U.S. government. Above $250K per bank, T-bills are unambiguously safer.

How often do T-bill yields reset?

Every auction. The Treasury auctions 4-week, 8-week, 13-week, and 17-week bills weekly. The 26-week auctions weekly and the 52-week auctions every four weeks. If rates rise, your next auction captures the new rate. CDs lock you in for the term.

Can I lose money on a T-bill?

Not if you hold to maturity - you get face value back, guaranteed. If you sell early on the secondary market and rates have risen significantly, you can take a small price loss. For 4-13 week bills, even worst-case price moves are tiny. For the 52-week bill, you could lose 1-2% of price in a sharp rate spike.

Are T-bills better than HYSAs?

Usually yes for high-tax-state residents and for amounts over $25K. T-bills give you state-tax exemption plus a typically higher yield than HYSAs. The HYSA wins for instant liquidity and for very small balances where the brokerage friction isn't worth it.

Can a business own T-bills?

Yes. An LLC, S-corp, or C-corp can buy T-bills through TreasuryDirect (entity account) or any business brokerage. For business reserves above the FDIC limit, T-bills are the standard playbook.

What's the minimum to buy a T-bill?

$100 face value at TreasuryDirect. $1,000 at most brokerages. CDs typically require $500-$1,000.

Do I need a TreasuryDirect account?

Not necessarily. You can buy new-issue T-bills at any major brokerage (Fidelity, Schwab, Vanguard) commission-free. TreasuryDirect is useful if you want auto-reinvest and don't have a brokerage account.

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Hans Goldstein - 213-414-2808 - NPN 20602398, independent licensed insurance producer appointed with multiple A-rated carriers

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Disclosure

This comparison reflects publicly available product information and approximate market yields as of the date stated above. CD, Treasury, bond, annuity, and money market rates change frequently — typically weekly for short-term instruments and monthly for annuities and bonds. Always confirm current values against the most recent issuer disclosure document, FDIC/NCUA insurance status, and the actual contract before purchasing. This article is general information for educational purposes; it is not a personalized recommendation, solicitation, or offer of any specific product. Tax treatment described reflects U.S. federal and state law as of 2026 and is subject to change; consult a qualified tax professional. Hans Goldstein is an independent licensed insurance producer (NPN 20602398, CA Life License #4163961) appointed with multiple A-rated carriers; he does not sell CDs, Treasuries, mutual funds, or securities. No compensation has been received from any carrier or institution in connection with the publication of this comparison. FDIC insurance covers deposits up to $250,000 per depositor, per insured bank, per ownership category. State insurance guaranty fund coverage on annuities varies by state and is typically $250,000-$300,000 per owner per carrier. Past performance does not predict future returns.