How a T-bill pays
TreasuryDirect sells bills at a discount or at par. At maturity you receive the face value, and the difference between what you paid and the face value is your interest. There are no coupons and no interest payments before maturity.
| Example | Amount |
|---|---|
| Face value of a 26-week bill | $10,000 |
| Price paid at auction (example) | $9,800 |
| Interest at maturity | $200 |
| Simple annualized return: $200 ÷ $9,800 × 52 ÷ 26 | 4.08% |
The price here is an illustration, not a current auction result; the auction sets the actual price each week. The compound interest calculator shows what rolling bills over at a steady rate would add up to, and the percentage calculator handles the discount arithmetic.
Terms and auctions
| Term | Auctioned |
|---|---|
| 4 weeks | weekly |
| 6 weeks | weekly |
| 8 weeks | weekly |
| 13 weeks | weekly |
| 17 weeks | weekly |
| 26 weeks | weekly |
| 52 weeks | every four weeks |
| Cash management bills | at irregular times, variable terms; only through a bank, broker or dealer |
Bills are sold in electronic form. The minimum purchase is $100, in $100 increments, up to $10,000,000 per auction with a non-competitive bid.
Taxes
TreasuryDirect: federal tax is due on the interest earned, and there are no state or local taxes. The exemption is what distinguishes a T-bill from a bank deposit or CD paying the same rate:
| $200 of interest, 22% federal rate | State tax 0% | State tax 5% | State tax 9% |
|---|---|---|---|
| Kept from a T-bill | $156 | $156 | $156 |
| Kept from bank interest, same amount | $156 | $146 | $138 |
The state rates are inputs for comparison, not any particular state's rate. The guide is savings interest taxable covers how bank interest is taxed, and FDIC insurance limits the coverage on the bank side.
Bills and savings bonds
- Treasury bills run 4 to 52 weeks, sold at a discount, no interest until maturity, and can be sold before maturity.
- Savings bonds such as I bonds and EE bonds are cashed in with TreasuryDirect after at least 12 months and have their own yearly purchase limits.
This guide follows the TreasuryDirect Treasury bills page. Auction results and the current rates are published by TreasuryDirect after each auction.
Frequently asked questions
What is a Treasury bill?
A short-term US government security. TreasuryDirect says bills are sold at a discount or at par and you receive the face value when the bill matures; the difference between the price you pay and the face value is your interest. Terms are 4, 6, 8, 13, 17, 26 and 52 weeks, plus cash management bills sold at irregular times.
How much do I need to buy a T-bill?
$100, the minimum purchase, and purchases are in $100 increments. The maximum through a non-competitive bid is $10 million per auction, per TreasuryDirect.
How often are T-bills auctioned?
Weekly for the 4, 6, 8, 13, 17 and 26-week bills and every four weeks for the 52-week bill. Cash management bills are auctioned at irregular times and, TreasuryDirect says, are only available through a bank, broker or dealer, not through TreasuryDirect.
Are T-bills taxed?
Federal income tax is due on the interest, but there are no state or local income taxes on it, per TreasuryDirect. That exemption makes a T-bill's after-tax yield higher than a bank account or CD with the same rate for anyone paying state income tax.
Does a T-bill pay interest before it matures?
No. The interest is the gap between the discounted price and the face value, received when the bill matures. A bill can be sold before maturity, but there are no interest payments along the way.
Sources
General information based on the sources above, not tax, legal or financial advice.