T-Bill vs duration ETF tax-equivalent yield comparator

Interest from US Treasury bills and Treasury-only ETFs is exempt from state and local income taxes, whereas corporate bond ETFs and bank CDs are taxed at both federal and state levels. This calculator computes your true after-tax yield pickup and the rate move required to wipe out a duration ETF’s carry.

Tax-equivalent T-Bill yield

6.01%

Pre-tax yield a fully taxable fund must beat

After-tax T-Bill yield: 3.35%; 3,347.50 net annual income
After-tax bond ETF yield: 2.98%; 2,979.95 net annual income
T-Bill net yield pickup: +36.8 bps; T-Bill wins after tax
Duration break-even yield rise: 48 bps; 1-yr parallel rate rise that wipes out ETF carry

1. Formule Mathématique et Identité de Valorisation

After-tax T-Bill yield = y_tbill × (1 − [t_fed + t_state × (1 − exempt%)])

Tax-equivalent yield = After-tax T-Bill yield ÷ (1 − (t_fed + t_state))

Duration break-even yield rise = After-tax ETF yield ÷ Modified duration

2. Mode d’Emploi et Paramètres d’Entrée

Enter the 3-month or 6-month T-Bill yield, the competing bond ETF’s SEC yield, its expense ratio and modified duration, plus your marginal federal and state income tax rates.

Adjust the percentage of fund income derived from US Treasury obligations (100% for direct T-Bills, typically 95–100% for Treasury ETFs).

3. Hypothèses Prudentielles et Limites du Modèle

Models ordinary income tax on distributions; does not model capital gains tax on price changes.
Uses first-order modified duration to estimate the parallel yield rise that offsets one year of after-tax carry.

4. Questions Fréquentes et Notes de Risque (FAQ)

Do Treasury ETFs qualify for state tax exemption?

Yes, in most US states the portion of an ETF’s dividends derived directly from US Treasury securities is exempt from state income tax, though states such as California, New York and Connecticut require the fund to hold at least 50% in US government obligations.

What is the duration break-even yield rise?

It is the parallel increase in bond yields (in basis points) over one year that would cause enough mark-to-market price loss to erase the ETF’s entire after-tax annual yield.

Comment les équipes de risque peuvent-elles auditer les résultats de « T-Bill vs duration ETF tax-equivalent yield comparator » ?

ETFYield Lab publie l'équation exacte et les conventions de calcul sur cette page. Les analystes peuvent reproduire les calculs sous Python/Pandas et vérifier la licence de la contrepartie via le centre de vérification de ETFYield Lab.

Avertissement : À des fins éducatives et de recherche quantitative uniquement ; ne constitue pas un conseil en investissement.