How this calculator works
A Treasury bill pays no coupon. You buy it below its face value and get the full face value back at maturity; the difference is your interest. Auction results quote a discount rate, which is figured on a 360-day year against the face value, so the calculator also converts it to the investment rate (the yield on what you actually paid, on a 365-day year) that you can compare with a CD or savings account APY.
- Price per $100 = 100 × (1 − discount rate × days ÷ 360). You pay face value × price ÷ 100.
- Interest = face value − what you pay.
- Investment rate, bills of 26 weeks or less = (100 − price) ÷ price × 365 ÷ days. For the 52-week bill TreasuryDirect uses a quadratic that assumes a half-year coupon; the calculator uses the same formula.
- Taxable yield to match = investment rate ÷ (1 − your state income tax rate).
Worked example
With these inputs: face value $10,000; term 26 weeks; discount rate 4%; your state income tax rate 5%.
The result is interest on a 26-week bill $202.22, with you pay $9,797.78 and you get back at maturity $10,000.00. The interest is taxed by the IRS but not by your state or city, so compare the yield with a CD or savings rate after state tax. The table prices every term at the same discount rate; real auctions set a different rate for each term.
Discount rate vs investment rate
Auction results quote two numbers. The discount rate is figured on the face value and a 360-day year, which understates what you really earn. The investment rate (also called the bond-equivalent or coupon-equivalent yield) is figured on the price you actually pay and a 365-day year, so it is the one to compare with a CD or a savings account APY. That's why the 26-week example shows a 4% discount rate but a 4.139% investment rate.
The table under the result prices every term at the same discount rate to show how the term changes the dollars: at 4%, a 4-week bill on $10,000 earns $31.11 and a 52-week bill earns $404.44. At a real auction each term gets its own rate, so type the rate for the term you plan to buy.
T-bills, CDs and savings for bill money
T-bills suit money with a date on it: a property tax bill in six months, a car insurance renewal, next year's tuition. Match the term to the due date and the full face value arrives in time. Bills are sold in $100 steps with a $100 minimum, directly on TreasuryDirect or through a brokerage account.
Compare the investment rate with a bank's APY in the APY calculator, a staggered set of CDs in the CD ladder calculator, or an account you can withdraw from any day in the money market calculator. For a yearly bill, the sinking fund calculator works out what to set aside each month before you buy the bill.
How T-bill interest is taxed
T-bill interest is subject to federal income tax but exempt from state and local income tax. It is taxed in the year the bill matures (or is sold), not spread over the months you hold it. In a state with no income tax the advantage disappears, so leave the state tax rate at 0 there.
Sources
- TreasuryDirect: Treasury Bills (4 to 52-week terms, $100 minimum, federal tax but no state or local tax)
- TreasuryDirect: Understanding pricing (price = face value × (1 − discount rate × days ÷ 360))
- 31 CFR Part 356, Appendix B: Treasury bill price, discount and investment rate formulas
- TreasuryDirect: Tax forms and withholding for marketable securities
Frequently asked questions
How do I calculate T-bill interest?
Multiply the discount rate by the days to maturity ÷ 360 and by the face value. A $10,000 26-week (182-day) bill at 4%: 10,000 × 0.04 × 182 ÷ 360 = $202.22 of interest, so you pay $9,797.78 and get $10,000.00 back.
What is the difference between the discount rate and the yield?
The discount rate uses the face value and a 360-day year. The investment rate (yield) uses the price you paid and a 365-day year, so it is always a little higher: 4.139% for the 26-week example at a 4% discount rate. Use the investment rate to compare with a CD or savings APY.
How much does a 4-week T-bill pay on $10,000?
At a 4% discount rate, $31.11: you pay $9,968.89 and get $10,000.00 back 28 days later. That's an investment rate of 4.068%. Enter the rate from the latest auction for today's figure.
Are T-bills better than a CD?
It depends on the rates and your state tax. T-bill interest is not taxed by your state, so in a state with a 5% income tax a CD needs a higher rate to match: 4.357% to match a 4.139% T-bill yield. CDs are FDIC-insured bank deposits; T-bills are backed by the U.S. government.
What is the minimum to buy a T-bill?
$100, and then any amount in $100 steps. The face value is what you get back at maturity; you pay a little less up front.