Treasury bills (T-bills) are short-term US government securities with maturities ranging from 4 weeks to 52 weeks. They are backed by the full faith and credit of the US government, making them essentially risk-free. In 2026, T-bill yields are competitive with high-yield savings accounts — and they have a tax advantage: T-bill interest is exempt from state and local income taxes.
Key takeaway: T-bills offer near-HYSA yields with zero default risk, state tax exemption, and a fixed yield locked in at purchase. The trade-off is less flexibility — you commit your money for 4 to 52 weeks and must wait until maturity (or sell on the secondary market) to access funds.
Treasury Bill Terms and Maturities
| T-Bill Term | Typical Auction Day |
|---|---|
| 4 weeks (1 month) | Every Tuesday |
| 8 weeks (2 months) | Every 4 weeks |
| 13 weeks (3 months) | Every Monday |
| 26 weeks (6 months) | Every Monday |
| 52 weeks (1 year) | Every 4 weeks |
Note: Treasury notes (2–10 year terms) and Treasury bonds (20–30 year terms) are separate products from T-bills.
How T-Bill Rates Work
T-bills are sold at a discount to face value. The return equals the difference between what you pay and the $1,000 (or other face value) you receive at maturity.
Example: 26-week T-bill at a 5.00% discount rate
- Face value: $1,000
- Purchase price: ~$975.04
- Interest earned: $24.96
- Annualized yield: ~5.00%
The rate quoted in auction results is the investment rate (or bond-equivalent yield) — the annualized return if you reinvested at the same rate over a year.
Current rates: Check TreasuryDirect.gov/marketable-securities/treasury-bills/ or your brokerage platform for the most recent auction results. Rates change weekly and reflect current Fed policy.
How to Buy Treasury Bills
Method 1: TreasuryDirect.gov (Direct from the Treasury)
- Cost: No fees — free to use
- Minimum: $100 per purchase (in $100 increments)
- How: Create an account, select “BuyDirect” → “Bills” → choose term → submit
- Settlement: Funds withdrawn on the auction date
- Limitation: Dated interface; less liquid (harder to sell before maturity)
Method 2: Brokerage Account (Fidelity, Vanguard, Schwab, etc.)
- Cost: No commission at major brokerages
- Minimum: Varies (often $1,000 face value)
- How: Search for “Treasury bills” in the fixed income/bond section of your brokerage
- Advantage: Can buy in secondary market (existing T-bills with varying maturities); easier to sell before maturity
- Best for: Most investors — familiar interface, no new account needed
Method 3: T-Bill ETFs
For maximum flexibility:
- SGOV (iShares 0-3 Month Treasury Bond ETF) — tracks 0-3 month T-bills; expense ratio 0.09%
- BIL (SPDR Bloomberg 1-3 Month T-Bill ETF) — similar; expense ratio 0.14%
- USFR (WisdomTree Floating Rate Treasury Fund) — floating rate treasuries
Trade-off: ETFs don’t lock in a yield and have small expense ratios, but they offer full daily liquidity and don’t require a TreasuryDirect account.
T-Bills vs High-Yield Savings Accounts vs CDs
| Feature | T-Bills | HYSA | 1-Year CD |
|---|---|---|---|
| Default risk | None (US Gov) | FDIC (up to $250K) | FDIC (up to $250K) |
| Rate type | Fixed at auction | Variable (can change) | Fixed |
| State income tax | Exempt | Taxable | Taxable |
| Liquidity | Wait for maturity (or sell) | Withdraw anytime | Penalty if early |
| Minimum | $100 (TreasuryDirect) | Usually $1 | Often $500-$1,000 |
| Purchase limit | None | None | None |
State tax advantage example:
- You’re in California (state tax rate: 9.3%)
- T-bill yield: 5.00%
- HYSA yield: 5.00%
- After-state-tax T-bill yield: 5.00% (exempt)
- After-state-tax HYSA yield: 4.54% (taxed at 9.3%)
- T-bill wins by ~46 basis points with identical nominal rates
In high-tax states, the state tax exemption makes T-bills meaningfully superior to HYSAs at similar rates.
T-Bill Laddering Strategy
A T-bill ladder staggers maturity dates to maintain liquidity while capturing fixed yields:
Example: $40,000 in 4 tranches
- $10,000 in 4-week T-bills → matures in 1 month
- $10,000 in 13-week T-bills → matures in 3 months
- $10,000 in 26-week T-bills → matures in 6 months
- $10,000 in 52-week T-bills → matures in 12 months
As each tranche matures, you reinvest in a new 52-week T-bill (assuming rates remain attractive). After one year, you have $10,000 maturing every 3 months — balancing yield lock-in with regular access to funds.
Tax Treatment of T-Bills
| Tax | Treatment |
|---|---|
| Federal income tax | Taxable as ordinary income |
| State income tax | Exempt |
| Local income tax | Exempt (in most jurisdictions) |
Report T-bill interest on Schedule B of your Form 1040. TreasuryDirect sends a 1099-INT; brokerages include T-bill income on your consolidated 1099.
State exemption documentation: On state tax returns, you’ll typically subtract T-bill interest as “US government obligations.” The specific form line varies by state — check your state’s instructions.
Related Resources
- Bond Investing Guide 2026 — full bond and fixed income hub
- I-Bonds vs Treasury Bonds — comparing savings bonds and T-bonds
- HYSA vs Treasury Bills — detailed rate and flexibility comparison
- How to Buy I-Bonds — Series I savings bonds guide
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