T-bill (Treasury Bill).

In plain English

A Treasury bill is short-term debt issued by the U.S. Treasury, with maturities of 4, 8, 13, 17, 26, or 52 weeks. T-bills are sold at a discount to face value: you pay $980 today for a bill that matures at $1,000 in 26 weeks. The $20 difference is your interest. T-bills are exempt from state and local income tax, backed by the full faith and credit of the U.S. government, and traded in the deepest debt market in the world.

01Why it matters

When yields are competitive, T-bills can pay more than the best HYSA and beat them on the state-tax exemption. They are also genuinely safer than bank deposits (Treasury default risk is below FDIC default risk in essentially every credible scenario). For taxable accounts in high-tax states, T-bills often win the after-tax yield comparison.

02The math, step by step

A 26-week T-bill auctioned in October 2024 yielded about 4.5%. On a $50,000 purchase, the buyer paid roughly $48,900 and received $50,000 at maturity, an interest payment of about $1,100, fully exempt from California's 13.3% top state rate.

03What this is NOT

04Receipts

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