Money Market vs T-Bill Calculator
Compare a money market fund against a Treasury bill after tax — T-bill interest is exempt from state tax, which can flip the winner.
How it works
MMF after-tax yield = yield × (1 − state rate) · T-bill after-tax yield = yield (state-exempt) · Income = amount × after-tax yield
A money market fund and a Treasury bill can quote nearly identical yields, but T-bill interest is exempt from state and local income tax while a taxable money market fund is not. In a high-tax state that exemption can hand the T-bill the win even when its headline yield is slightly lower. This tool compares the two on an after-state-tax basis; both remain subject to federal tax, which does not affect the comparison.
Worked example
On $25,000 with a 6% state tax, a 4.7% money market fund keeps 4.7% × 0.94 = 4.418%, while a 4.6% T-bill keeps the full 4.6%. The T-bill wins, earning 4.6% × 25,000 = $1,150 versus $1,104.50 — about $45 more a year.
Frequently asked questions
Why are T-bills exempt from state tax?
Interest on federal government debt, including Treasury bills, is by law exempt from state and local income taxes. It is still subject to federal income tax.
Does this include federal tax?
No — both instruments are taxed federally at the same rate, so federal tax does not change which one wins. Only the state-tax exemption on the T-bill affects the comparison.
What about a government money market fund?
A government money market fund that holds mostly Treasuries may pass through a partial state-tax exemption. Check the fund's year-end tax information; this calculator assumes a fully taxable money market fund.
Related calculators
Educational estimate, not investment advice. Options and margin involve substantial risk.