Treasury Bills: Short-Term Government Debt for Savers
For savers in high-tax states, the state tax exemption can be worth more than the rate difference.
At a glance
Figures checked 1 Sep 2026
What to take away
- Sold at a discount and redeemed at face value — the difference is your interest.
- Terms run from four weeks to 52 weeks.
- State tax exemption raises the effective yield in states with an income tax.
A Treasury bill is a short-term government IOU. You buy below face value and receive the full face value at maturity. Because it is a direct obligation of the Treasury, there is no bank credit risk and no need for deposit insurance.
The state tax advantage
T-bill interest is exempt from state and local income tax. In a state with a 6% income tax, a 4.00% T-bill yields roughly as much after tax as a 4.25% bank account. In a state with no income tax the advantage disappears.
Where to buy
- TreasuryDirect, straight from the government, with a $100 minimum and no fees.
- A brokerage, at auction or on the secondary market, which is easier to manage alongside other holdings.
- A short-term Treasury ETF or money market fund, for convenience at the cost of a small expense ratio.
TreasuryDirect supports automatic reinvestment, which turns a series of T-bills into a self-maintaining ladder.
Common questions
Bills bought at a brokerage can be sold on the secondary market at the prevailing price. Those held at TreasuryDirect generally need to be transferred before selling.