toolbox
Home / Money & Investing / Treasury Ladder Tax Impact Estimator

Treasury Ladder Tax Impact Estimator

The Treasury Ladder Tax Impact Estimator measures the federal income-tax drag on modeled Treasury interest and separately shows the state/local tax that would have applied if the same interest were fully taxable at the entered state rate. Under current U.S. rules, marketable Treasury interest is subject to federal income tax but exempt from state and local income taxes.

That makes the calculator useful when comparing Treasury yields with bank deposits or other fixed-income choices that may be taxable at both levels. The “state tax avoided” figure is a comparison aid, not a tax credit or deduction.

Inputs

USD
%
%
%
Result
—
Estimated after-federal-tax annual interest
Gross annual interest—
Estimated federal tax—
State/local tax avoided vs fully taxable interest—

1. Enter Treasury principal
Use the amount whose annual interest you want to evaluate.

2. Enter average Treasury yield
The calculator converts principal and yield into modeled gross annual interest.

3. Enter federal rate
This rate is applied to Treasury interest in the estimate.

4. Enter comparison state rate
Use your state/local marginal rate only to estimate tax avoided versus otherwise fully taxable interest.

5. Review net interest and tax savings
The main result shows after-federal-tax income; the comparison row shows the modeled state/local exemption value.

Gross interest = Principal × y
Federal tax = Gross interest × f
After-tax Treasury interest = Gross interest − Federal tax
State/local tax avoided = Gross interest × s

s is used only for comparison because Treasury interest is not subject to state or local income tax. The model does not calculate a full tax return.

What the result means

The main result estimates the annual Treasury interest remaining after applying the entered federal marginal rate.

The state/local tax avoided figure is a hypothetical comparison with fully taxable interest and is not itself a payment or refund.

Given: $250,000 principal, 4.25% yield, 24% federal rate, and 6% state/local comparison rate.

Calculation: Gross interest = $10,625. Federal tax = $10,625 × 24% = $2,550. After-tax Treasury interest = $8,075. State/local tax avoided versus fully taxable interest = $10,625 × 6% = $637.50.

Result: Estimated after-federal-tax interest of $8,075 per year.

Interpretation: The Treasury’s state/local income-tax exemption is worth about $638 in this simplified comparison.

Are Treasury securities completely tax free?

No. Marketable Treasury earnings are generally subject to federal income tax. The key exemption modeled here is from state and local income taxes.

What does “state tax avoided” mean?

It estimates what state/local income tax would have been on the same gross interest if it were fully taxable at the entered rate. It is a comparison amount, not money paid by the government.

Does the calculator include capital gains?

No. Selling a Treasury before maturity can create a gain or loss, and special rules can apply to discounts and premiums.

Should I use my marginal or effective federal rate?

The calculator is designed around a marginal-rate assumption for incremental interest income. Your actual tax burden can differ based on the rest of your return.

Can this compare Treasuries with CDs?

Yes at a high level. You can compare the Treasury after-tax interest here with a CD after-tax estimator using the same principal and appropriately matched yields.