How to Calculate T-Bill Yields: Real Returns on Treasury Bills in 2026

Treasury bills (T-bills) are the safest dollar-denominated asset on earth — backed by the U.S. government and currently yielding 4.2–4.5% as of 2026. But calculating your actual return isn’t as simple as looking at the face value and the price you paid. T-bills use a unique discount yield convention that can confuse even experienced investors.

Use the investment calculator at TodayCalculator to model your returns, but here’s exactly how T-bill yields work — and how to calculate what you’ll actually earn.

T-Bill Math: The 3 Yields You Need to Know

T-bills are sold at a discount to face value. You buy a $1,000 T-bill for $980, and at maturity you get $1,000. The $20 difference is your profit. But there are three different ways to express that return, and they give different numbers:

Yield Type	Formula	What It Measures	Example (4-week T-bill, $995 purchase price)
Discount Yield	(Discount ÷ Face) × (360 ÷ Days)	Bank convention, NOT your actual return	($5 ÷ $1,000) × (360 ÷ 28) = 6.43%
Investment Yield	(Discount ÷ Price) × (365 ÷ Days)	Your actual annualized return	($5 ÷ $995) × (365 ÷ 28) = 6.56%
Effective Annual Yield	(1 + Investment Yield)^(365/Days) − 1	Compounded return if you reinvested	(1 + 0.0656)^(365/28) − 1 = 6.78%

The discount yield is what you’ll see quoted on TreasuryDirect and in news headlines. It’s the lowest number and it understates your actual return. The investment yield (also called bond equivalent yield) is the number that matters for comparing T-bills to CDs, savings accounts, and bonds.

Real-World Example: 4-Week vs 26-Week T-Bill in 2026

Here’s what you’d actually earn on two different T-bill maturities at current rates (as of September 2026):

Detail	4-Week T-Bill	26-Week T-Bill
Face value	$10,000	$10,000
Purchase price	$9,967.78	$9,787.12
Discount	$32.22	$212.88
Quoted discount yield	4.25%	4.35%
Investment yield (actual)	4.36%	4.48%
Actual dollars earned	$32.22	$212.88
After-tax at 22% rate	$25.13	$166.05

For the 26-week T-bill, you invest $9,787.12 and get $10,000 back in 6 months. That’s $212.88 in profit, or $166.05 after federal tax (T-bill interest is subject to federal tax but exempt from state and local tax). Your effective after-tax annualized return is 3.49% — still competitive with many high-yield savings accounts, plus the tax benefit of no state income tax.

T-Bills vs CDs vs HYSA: Which Gives the Best After-Tax Return?

Investment	Rate (Sep 2026)	Federal Tax (22%)	State Tax (5%)	After-Tax Yield
T-Bill (26-week)	4.48%	Yes	No	3.49%
CD (1-year)	4.25%	Yes	Yes	3.10%
HYSA	4.00%	Yes	Yes	2.92%
Municipal Bond (AAA)	3.50%	No	Varies	3.50%

T-bills beat CDs and savings accounts on after-tax return because of the state tax exemption. In a state with 5% income tax, the T-bill’s 4.48% investment yield is equivalent to a 4.71% fully taxable yield. The tax advantage grows with your state tax rate — in California (9.3%), the taxable equivalent is 4.94%.

How to Buy T-Bills: 3 Methods

1. TreasuryDirect.gov — Free, direct from the Treasury. Minimum $100. You can set up auto-reinvest (laddering). The downside: clunky interface, no secondary market (you can’t sell before maturity).
2. Brokerage account (Fidelity, Schwab, Vanguard) — Free for new issues, minimal fees for secondary market. You can sell before maturity if needed, and you can buy in $1,000 increments. Much easier to build a ladder.
3. T-bill ETFs (SGOV, BIL, USFR) — Instant diversification across maturities, daily liquidity, and dividends. Expense ratios are 0.07–0.15%. Returns are slightly lower than direct T-bills (by roughly the expense ratio), but you get instant liquidity.

The Bottom Line

At 4.2–4.5% discount yields, T-bills are a strong option for cash you don’t need for 1–12 months. The state tax exemption is the hidden advantage — it’s worth 0.2–0.4% in extra after-tax yield compared to a CD or savings account. Use the investment calculator to model your specific return, and remember: the investment yield (not the discount yield) is the number that reflects your actual earnings.