I was bored, so I did some comparison of T-Bill rates vs. equivalent bank rates and actual bank account rates for various combinations of Federal and State tax brackets. Yes, I’m weird. As expected, if you don’t pay state or local taxes, T-Bills are pretty bland. However, if you are in a higher income tax bracket or in a heavily-taxed area, they can become pretty attractive.
The actual bank account rates are an approximate of the best rate you can find at an FDIC or NCUA-insured bank or credit union with a similar minimum deposit of about $1,000.
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I’ve got a quick question about T-bills and federal/state income tax. Where exactly is the interest on T-bills listed as income? Interest or Dividend? Reason I ask is my state tax form simply requires me to copy my federal income numbers and report them. I believe the “interest” box is included, but the “dividend” box is not. TIA – Brent
T-bills are completely new to me. If I were interested in getting these, what would be the process? I would consider doing this and use the funds from 0% credit card balance transfers.
I think you should take inflation into consideration. Looking at money after taxes and after adjusting for inflation is really how much you are making.
Lots of info at TreasuryDirect.gov and in the previous entries of this blog. Check out previous recent posts, or the ‘Savings Bonds’, ‘Stocks and Bonds’, and ‘General’ categories. Or search for “bill” that might work too.
Tax Info. Looks like interest, as they mention sending you a 1099-INT.
LSD – That is true, but inflation eats away at everything. Cash in your wallet, eaten up by inflation. Value of house, stocks, etc. So even if I am only earning a little above inflation, if I wasn’t I’d be losing a big amount otherwise. Or maybe I’m just lazy 🙂
Just found this:
PDF regarding taxes
…and it looks like you can set up reinvestment for T-Bills. Man their site is disorganized.
Just a note – part of the reason T.D. seems so disorganized is that they’re in the (long) process of switching from a several-year-old Treasury Direct website (you’ll find occasional references to “Legacy Treasury Direct) to the new improved version.
The old version was a real mess, couldn’t even view pending transactions.
They’ve slowly moved to the new site, first with savings bonds, now with the marketable securities. They’re understandably leaving the Legacy T.D. operational for a while, presumably so as not to scare away long-time users.
Unfortunately, they don’t make the fact that there is a transition going on very visible for new users unless they really dig. This confuses new users who find different instructions for the two sites, etc.
However IMO, once you separate out all the legacy site bologna, the new site looks slicker than any bank website I’ve seen!
Agreed, they have a lot of good info there, but it is scattered ALL over the place. I’m thankful I have this blog to keep track of certain useful links.
Yup, there was a typo in my chart for the 9% bracket, it should be good now.