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Treasury vs CD After-Tax Yield Calculator

Compare after-tax yields of Treasuries (state tax-free) vs taxable CDs using your federal and state tax rates.

Results

Treasury after-tax yield
3.42%
CD after-tax yield
3.61%
Higher after-tax yield
cd

How to use this calculator

  1. Enter the current Treasury yield and a comparable CD yield.
  2. Enter your federal and state marginal tax rates.
  3. Review after-tax yields and which option is higher at your rates.

Inputs explained

Yields
Use APY/yield quotes for comparable terms.
Tax rates
Use marginal tax rates; Treasuries are exempt from state tax.

How it works

Treasury after-tax yield = Treasury yield × (1 − federal tax rate) because Treasuries are exempt from state tax.

CD after-tax yield = CD yield × (1 − federal − state + federal×state) to reflect taxable interest.

We display both after-tax yields and indicate which pays more.

Formula

Treasury after-tax = Treasury yield × (1 − Fed tax)
CD after-tax = CD yield × (1 − Fed − State + Fed×State)
Higher option = max(Treasury after-tax, CD after-tax)

When to use it

  • Choosing between Treasury bills/notes and bank CDs for short-term savings.
  • Testing how state tax makes Treasuries more attractive in high-tax states.
  • Comparing brokered CDs vs Treasuries inside taxable accounts.

Tips & cautions

  • Use matching terms (e.g., 6-month T-bill vs 6-month CD) for fair comparison.
  • In high state-tax brackets, Treasuries often outperform CDs after tax even if the headline rate is lower.
  • Inside tax-advantaged accounts, taxes don’t apply—compare gross yields instead.
  • Assumes simple marginal tax treatment; ignores AMT and phase-outs.
  • Does not include state/local exemptions or CD early-withdrawal penalties.
  • Assumes ordinary income treatment for interest; no time value adjustment for compounding differences.

Worked examples

4.5% Treasury vs 5.0% CD, 24% fed, 5% state

  • Treasury after-tax ≈ 3.42%
  • CD after-tax ≈ 3.61%
  • CD higher

5.0% Treasury vs 5.1% CD, 32% fed, 0% state

  • Treasury after-tax ≈ 3.40%
  • CD after-tax ≈ 3.47%
  • CD higher (close)

Deep dive

This Treasury vs CD calculator compares after-tax yields using your tax rates so you can see which option pays more in a taxable account.

Use it to decide between Treasuries (state tax-free) and taxable CDs, especially in high-tax states.

FAQs

Why are Treasuries state tax-free?
Treasury interest is exempt from state/local income tax; CDs are typically fully taxable.
Does this handle AMT?
No. AMT and other tax nuances aren’t modeled—consult a tax professional for complex situations.
Can yields change before maturity?
This compares quoted yields; actual reinvestment rates may differ when instruments mature.
What about CDs in an IRA?
In tax-advantaged accounts, compare gross yields since taxes are deferred/irrelevant.
Early withdrawal penalties on CDs?
Not modeled. Consider penalties if you may break a CD early.

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Estimates only. Tax treatment varies by jurisdiction and account type. Consult a tax advisor before making investment decisions.