When you’re deciding where to keep your cash, the account with the highest advertised interest rate isn’t always the one that earns you the most money.
High-yield savings accounts (HYSAs) and Treasury money market funds are great places to put your cash but they are taxed differently. And based on your tax rates, that difference can make a Treasury money market fund more rewarding.
Our Tax-Equivalent Yield Calculator helps you compare the two options based on how much money you’ll actually keep after taxes.
How the Calculator Works
Enter the amount you plan to save or invest, the interest rate on your high-yield savings account, and the yield on a Treasury money market fund.
Next, enter your federal marginal income tax rate and your combined state and local income tax rate. You can also adjust the percentage of the Treasury fund’s income that’s exempt from state income taxes.
The calculator will show you:
- After-tax HYSA yield: The effective annual yield on your savings account after federal, state, and local income taxes.
- After-tax Treasury money market yield: The effective annual yield on the Treasury fund after accounting for its potential state and local tax exemptions.
- Tax-equivalent yield: The yield a fully taxable savings account would need to offer to match the Treasury money market fund’s after-tax return.
- Annual dollar difference: How much more you could earn each year with one option versus the other, based on your balance.
This makes it easier to compare the two options on an apples-to-apples, after-tax basis.
HYSA vs. Treasury Money Market Calculator
Find out which option could earn you more after federal, state, and local income taxes.
Your savings
Your tax rates
Estimated annual results using the yields you entered.
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—Comparable fully taxable HYSA yield
—Treasury yield needed to match this HYSA
Estimates assume unchanged annualized yields and marginal tax rates. HYSA APY includes compounding, while a fund’s 7-day SEC yield is a recent annualized income measure; they are not identical. Calculations use a simplified additive federal and state/local tax model and exclude NIIT, federal deductibility of state taxes, other tax interactions, and any additional fees. Treasury fund distributions may only be partially state-tax exempt and some states impose minimum-holding requirements. This calculator is educational, not tax advice.
Why Treasury Money Market Funds Can Have a Tax Advantage
Interest earned in a high-yield savings account is generally subject to federal income tax as well as applicable state and local income taxes.
Interest earned directly from U.S. Treasury securities is subject to federal income tax but generally exempt from state and local income taxes.
Treasury money market funds invest in short-term Treasury securities and other highly liquid investments. Depending on the fund’s holdings, some or all of the income distributed by the fund may qualify for that same state and local tax exemption.
For example, suppose you’re comparing:
- A high-yield savings account paying 4.00% APY.
- A Treasury money market fund yielding 3.80%.
- A 24% federal marginal income tax rate.
- An 8% combined state and local income tax rate.
Assuming the Treasury fund’s income is entirely exempt from state and local income taxes, the HYSA’s estimated after-tax yield would be 2.72%, while the Treasury fund’s would be 2.89%.
The Treasury fund’s tax-equivalent yield would be approximately 4.25%. In other words, you’d need a
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