Updated October 27, 2026 from live rates
Where to keep cash in Connecticut
Connecticut’s top income tax rate is 6.99%. At that rate and 37% federal, a 1-year Treasury bill at 4.50% keeps the most: about $7,088 a year on $250,000 after tax, versus $14 in a default brokerage sweep. A CD or savings account would need to pay 5.06% to keep as much as a 1-year Treasury bill at 4.50%.
Why Treasuries win in Connecticut
Savings accounts, CDs and most money funds pay interest that Connecticut taxes at up to 6.99%. Treasury bills don’t. So a Treasury bill paying 4.50% keeps what a fully taxable account paying 5.06% would, for a top-bracket Connecticut resident. Today the best 1-year CD we track pays 4.65% and the best savings account 3.55%.
Municipal money funds in Connecticut
We don’t list a money fund that holds only Connecticut municipal debt. A national municipal fund is free of federal tax but generally taxed by Connecticut; for a top-bracket resident it needs at least 3.05% to beat a 1-year Treasury bill.
Connecticut taxes on cash, in brief
- Top income tax rate: 6.99%. Your own rate may be lower; change it above.
- Interest on U.S. Treasury bills, notes and bonds: exempt from state and local income tax, taxed federally.
- Savings accounts, CDs and prime or government money funds: taxed by Connecticut, except the share of a fund’s income that comes from U.S. Treasuries.
- Connecticut lets you exclude a fund’s Treasury income only if the fund holds at least 50% U.S. government securities. Treasury-only funds qualify; many government funds don’t.
Questions
Is Treasury bill interest taxed in Connecticut?
No. Interest on U.S. Treasury bills, notes and bonds is exempt from state and local income tax under federal law, so Connecticut doesn’t tax it. It is still subject to federal income tax. Interest from savings accounts and CDs is taxed by Connecticut at up to 6.99%.
Where should I keep cash in Connecticut?
At Connecticut’s top rate and 37% federal, a 1-year Treasury bill keeps the most after tax today (4.50%). The answer depends on your brackets; the calculator on this page updates for yours.
What rate does a CD need to beat Treasury bills in Connecticut?
At Connecticut’s top rate and 37% federal, a CD or savings account needs at least 5.06% to keep as much as a 1-year Treasury bill paying 4.50%.
Rates: each provider’s own page and the U.S. Treasury, October 27, 2026. State rates: Tax Foundation, 2026 (top single-filer rate; local taxes not included). General information, not tax advice. Other states →