Treasury Bills vs HYSA in 2026: Where the Cash Goes
The "where do I put my cash" question used to have a stupid easy answer: any high-yield savings account paying 4-5% in 2023-2024. In 2026, with the Fed having cut rates back into the 3.5-4.0% range, the answer is more nuanced. Treasury bills currently pay slightly more than HYSAs in nominal yield, but the comparison is closer than at peak rates — and the tax treatment makes the real after-tax gap larger than headline.
This is the breakdown: yield, liquidity, taxes, and the breakeven where T-Bills clearly beat the best high-yield savings accounts.
The 2026 Yield Picture
| Vehicle | Approx. yield (mid-2026) | Liquidity | Federal tax | State tax |
|---|---|---|---|---|
| Best HYSA (Marcus, Ally, etc.) | 3.85-4.05% | Same-day | Yes | Yes |
| 4-week T-Bill | 3.95-4.15% | Hold to maturity | Yes | No |
| 13-week T-Bill | 4.05-4.25% | Hold to maturity | Yes | No |
| 1-year T-Bill | 3.90-4.10% | Hold to maturity | Yes | No |
| Money Market Fund (SPAXX, SWVXX) | 3.90-4.10% | 1-day | Yes | Yes (mostly) |
On a pure yield basis, T-Bills currently edge out HYSAs by 10-25 basis points. The gap looks small. But the after-tax math changes things meaningfully for high earners in high-tax states.
The State Tax Angle (Biggest Differentiator)
Treasury interest is exempt from state and local income tax. HYSA interest is fully taxable at federal + state + local rates.
For someone in California (13.3% top marginal rate), at the 22% federal bracket:
- HYSA at 4.0%: after-tax yield = 4.0% × (1 - 0.22 - 0.133) = 4.0% × 0.647 = 2.59%
- T-Bill at 4.0%: after-tax yield = 4.0% × (1 - 0.22) = 3.12%
That's a 53 basis point gap on the same headline yield, just because of state tax exemption. On a $50K cash position, that's $265/year of difference.
For someone in Texas or Florida (no state income tax):
- HYSA at 4.0%: after-tax = 3.12%
- T-Bill at 4.0%: after-tax = 3.12%
Identical. T-Bills offer no state tax advantage if you don't pay state tax.
The Liquidity Trade-off
HYSA: same-day liquidity. Money in checking on demand. No commitment.
T-Bill: must hold to maturity (4 weeks, 13 weeks, 26 weeks, 52 weeks). Can sell on the secondary market early but at potentially worse pricing during stress.
Money Market Fund (SPAXX at Fidelity, SWVXX at Schwab): 1-day liquidity. Fully liquid for practical purposes. Slightly lower yield than T-Bills but fully state-tax-disadvantaged like HYSA.
The Specific Recommendations
Emergency fund (under 6 months expenses): HYSA. Liquidity matters more than yield. The 25 bp difference doesn't justify the maturity friction for cash you might actually need this week.
Cash you don't need for 1-12 months (down payment, capital gains escrow, taxes due): T-Bills, laddered. Buy 4-week, 13-week, and 26-week T-Bills in equal amounts. As each matures, roll into the longest maturity. You always have cash maturing within 4 weeks while capturing the longer-maturity yield.
Cash you need full liquidity on but in high-tax state: Money Market Fund (SPAXX, SWVXX) is the compromise — 1-day liquidity, partial state-tax exemption (most money market funds hold a mix of T-Bills and other paper, with proportional tax exemption disclosed annually).
Large cash positions ($100K+) in CA/NY/NJ: T-Bills clearly win. The state-tax savings on $100K is $400-$600/year. Worth the maturity friction.
How to Buy T-Bills
Two paths:
- TreasuryDirect.gov: Direct from the Treasury, $0 fees, but the website is famously bad. Setup is annoying but works.
- Brokerage (Fidelity, Schwab, Vanguard): Free for primary issuance T-Bills at most brokers. Cleaner UX. Funds transfer is faster. Recommended for most people.
At Fidelity: Trade > Fixed Income > New Issues > Treasury Bills. Pick maturity, quantity ($1,000 minimum), submit. T-Bills auction on Mondays for most maturities. Funds settle 1 business day after auction.
The HYSA Alternatives Worth Knowing
If you're going HYSA route, the main contenders in 2026:
- Marcus by Goldman Sachs: 3.95-4.05% range, no fees, decent UX
- Ally Bank: 3.85-4.05% range, banking + savings combined
- Wealthfront Cash: 4.0-4.2%, FDIC-insured up to $8M via partner banks (but Wealthfront isn't a bank itself)
- SoFi: 3.80-4.20% with direct deposit; lower without — see SoFi
Don't bother with the "promotional" rate banks (those that drop your rate after 90 days). The honest top-tier HYSAs publish a single rate that doesn't have a teaser cliff.
For more on the broader cash-vs-investment decision (especially when rates are above inflation), see DCA vs lump sum. For tax structure on investment income, see quarterly estimated taxes.
FAQ
Are T-Bills safer than HYSAs?
Both are extremely safe. T-Bills are direct US Treasury obligations — backed by the full faith and credit of the US government. HYSAs are FDIC-insured up to $250K per depositor per bank. For amounts under $250K in a stable bank, both are equivalently safe. For amounts over $250K, T-Bills (uncapped) are technically safer.
What's the smallest amount worth putting in T-Bills?
Minimum at brokerage is $1,000 face value. Practical minimum where the math is worth the friction: probably $5K-$10K. Below that, the state-tax savings is small enough that the convenience of HYSA dominates.
Can I sell T-Bills early if I need the cash?
Yes, in the secondary market via your broker. Pricing depends on prevailing rates and time-to-maturity. In normal markets, you'll get within ~0.1% of par. In stress (rate spikes), you could see meaningful losses on a 52-week T-Bill sold early. Use shorter maturities or a ladder if liquidity matters.
How are T-Bills taxed exactly?
Federal income tax on the interest (the discount-to-par at maturity, which is the implicit yield). No state or local tax. You receive a 1099-INT at year-end if you held them through any portion of the year. Held in an IRA, no tax at all.