Treasury bills and high-yield savings accounts are the two most common homes for risk-free cash in 2026. Headline rates are often close enough that choosing between them feels like a coin flip — but once you factor in state income taxes and liquidity, one option usually wins clearly for your specific situation. Here is how to run the comparison correctly.
What changed in 2026
- TreasuryDirect improved its interface in late 2025, making direct T-bill purchases more accessible for non-institutional buyers.
- Brokerage T-bill access normalized. Fidelity, Schwab, and Vanguard now make T-bill purchases nearly as seamless as buying a stock — often settling the same day.
- HYSA rates softened slightly. Several online banks trimmed rates 10–30 basis points in early 2026; T-bills stayed competitive because they track auction demand directly.
- State-tax awareness grew. More savers discovered the state-tax exemption in 2025 and are now deliberately comparing after-tax yields.
The core comparison
| Feature |
T-bills |
HYSA |
| Typical yield (mid-2026) |
4.6–5.0% |
4.5–5.2% |
| Federal income tax |
Yes (ordinary income) |
Yes (ordinary income) |
| State/local income tax |
Exempt |
Taxable |
| Liquidity |
At maturity (4–52 weeks) |
Same-day to 3 business days |
| FDIC/government backing |
U.S. government |
FDIC up to $250k |
| Minimum purchase |
$100 (TreasuryDirect) |
Varies ($0–$500) |
| Complexity |
Slightly higher |
Very simple |
The after-tax math
The state-tax exemption is the decisive variable. Here is a simplified comparison:
If you live in a state with a 6% income tax rate and your T-bill yields 4.8% while the best HYSA yields 5.0%:
- HYSA after-tax yield: 5.0% × (1 − 0.06 state) = ~4.70% (simplified, ignoring federal for comparison purposes)
- T-bill after-tax yield: 4.8% (no state tax) = 4.8%
In this scenario, the T-bill wins despite having a lower headline rate. Run this comparison with your state's actual marginal rate for accuracy.
States with no income tax (Florida, Texas, Washington, Nevada, and others) receive no benefit from the T-bill exemption — the HYSA typically wins there on headline yield.
How to pick
- Identify your state's income tax rate on ordinary income. Use your marginal state rate for the calculation.
- Compare after-tax yields using the simplified formula above.
- Assess your liquidity need. If there is any chance you need the money before the T-bill matures, keep that portion in a HYSA.
- Choose your purchase method. TreasuryDirect.gov for direct purchases; your brokerage for a more integrated experience.
- Consider a split. Emergency fund (1–2 months) in HYSA; savings buffer (3–12 months) in a T-bill ladder across 4, 8, and 13-week bills.
T-bill ladder basics
A simple ladder rolls maturities to maintain ongoing liquidity:
| Bill |
Term |
Amount |
| Bill 1 |
4 weeks |
$5,000 |
| Bill 2 |
8 weeks |
$5,000 |
| Bill 3 |
13 weeks |
$5,000 |
When Bill 1 matures in 4 weeks, reinvest in a new 13-week bill. Now you have a T-bill maturing every 4 weeks, providing steady liquidity while earning near full short-term yield.
Common mistakes
Forgetting the T-bill is locked. You cannot sell a TreasuryDirect T-bill before maturity. If you might need the cash, either use a HYSA or buy through a brokerage where T-bills trade in a secondary market.
Comparing pre-tax yields only. The 0.2% headline difference can flip entirely after state taxes in a high-tax state.
Using TreasuryDirect for active management. The site works but is clunky for frequent transactions. Brokerage T-bill purchases offer better tooling for laddering.
Skipping the math on small balances. On a $3,000 balance, the after-tax difference between the two options is often under $20/year — not worth significant complexity.
Assuming T-bills are always better. In no-income-tax states, a HYSA with a competitive rate is often the simpler and equally rewarding choice.
What to skip
- Long-term T-notes and T-bonds if your goal is short-term cash parking — the yield curve may not reward you for the additional duration risk.
- I-bonds for this comparison — they have a 12-month lock-up and annual purchase limits that make them unsuitable as a HYSA substitute.
- Indirect T-bill exposure through bond ETFs if you need a predictable maturity date — ETF prices fluctuate even when underlying T-bills do not.
FAQ
How do I actually buy a T-bill?
Through TreasuryDirect.gov (direct purchase, no fee, no secondary market), or through your brokerage under "Fixed Income" or "Treasuries" (fee-free at major brokers, can sell before maturity).
When do I owe taxes on T-bill interest?
T-bill interest is earned at maturity (for discount bills) and reported in that tax year. You will receive a 1099-INT.
What is the safest option?
Both are effectively risk-free. T-bills are backed by the U.S. government with no per-depositor limit; HYSAs are FDIC-insured up to $250k.
Can I set up T-bill auto-reinvestment?
Yes. TreasuryDirect and most brokerages allow automatic reinvestment at maturity into the same or a specified term.
Where to go next
Explore related options with High-yield savings rates in 2026, Best CD rates in 2026, and How to beat inflation in 2026.