Bought at a discount, paid at par
A Treasury bill pays no interest along the way. Instead you buy it below face value and are repaid the full face value at maturity. That gap — face minus price — is your entire return. The art is turning that dollar gain into an annual rate you can compare against anything else, and there’s more than one way to do it.
Two yields, one bill
discount yield = (discount ÷ face) × (360 ÷ days)
investment yield = (discount ÷ price) × (365 ÷ days)
The discount yield divides by face value over a 360-day year — the quoting convention. The investment yield divides by the price you actually paid over a 365-day year, so it reflects your real return and is always the higher of the two.
What makes this calculator different
- The true yield, not just the quoted one. Most tools stop at the bank discount yield, which understates your return. We lead with the investment (bond-equivalent) yield on your actual purchase price.
- Discount, investment yield, and APY side by side. See the dollar return, both annualized yields, and the compounded APY if you keep reinvesting.
- The state-tax advantage, quantified. T-bill interest is state-tax-free. We compute the taxable-equivalent yield a CD or HYSA would need to match it after your state tax.
- Every standard term. 4, 8, 13, 17, 26, and 52 weeks, annualized consistently so you can compare across maturities.
Frequently asked questions
How do Treasury bills work?+
A T-bill is short-term U.S. government debt that pays no coupon. Instead, it’s sold at a discount to its face value: you might pay $975 for a bill worth $1,000 at maturity. When the bill matures, the Treasury pays you the full $1,000, and the $25 difference is your return. Bills come in standard terms of 4, 8, 13, 17, 26, and 52 weeks, and are backed by the full faith and credit of the U.S. government.
What’s the difference between the discount yield and the investment yield?+
T-bills are quoted on the bank discount yield, which is figured on the face value and a 360-day year — a convention that makes the rate look lower than your actual return. The investment yield (also called the coupon-equivalent or bond-equivalent yield) measures the same dollar gain against the money you actually put up, annualized over a 365-day year. Because you pay less than face value, dividing by the purchase price and using 365 days both push the number up. The investment yield is the honest figure to compare against a CD or savings account, and it’s always higher than the quoted discount yield.
Are Treasury bills exempt from state taxes?+
Yes. Interest from T-bills (and other U.S. Treasury securities) is exempt from state and local income tax, though it is still subject to federal income tax. If you live in a state with income tax, this exemption can make a T-bill meaningfully more attractive than a CD or high-yield savings account paying the same headline rate. This calculator computes the taxable-equivalent yield — the rate a state-taxable account would need to match the T-bill after state tax.
Are T-bills better than a CD or high-yield savings account?+
It depends on the rates and your state tax rate. T-bills win on safety (direct government backing) and on taxes (state-tax-free), so even a slightly lower headline yield can beat a taxable CD or HYSA on an after-tax basis. CDs and savings accounts may offer easier access or higher nominal rates. Use the taxable-equivalent yield shown here to compare apples to apples: if a taxable account pays less than that number, the T-bill is the better deal for you.
Where do I buy Treasury bills?+
You can buy new-issue T-bills directly and commission-free at TreasuryDirect.gov, the U.S. Treasury’s official site, in $100 increments through regular auctions. You can also buy them through most brokerages, either at auction or on the secondary market, and many money-market and Treasury ETFs hold them on your behalf. Buying at auction means you accept the rate set by the auction; the discount (and therefore your purchase price) is determined there.
Disclaimer: This calculator is for educational purposes only. Yields depend on the auction price and term, conventions vary slightly by source, and the state-tax treatment assumes you hold the bill yourself. It is not financial or tax advice — confirm details with TreasuryDirect or your broker and a tax professional.