Updated October 27, 2026 from live rates

Where to keep cash in Kentucky

Kentucky’s top income tax rate is 3.50% (a flat rate). 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 $15 in a default brokerage sweep. A CD or savings account would need to pay 4.76% to keep as much as a 1-year Treasury bill at 4.50%.

Option

Rate

Kept a year on $250,000

1-year Treasury bill

4.50%

$7,088

CFG Bank 1-year CD

4.65%

$6,917

3-month Treasury bill

4.22%

$6,647

Treasury-only money fund

3.79%

$5,969

Marcus by Goldman Sachs 11-month No-Penalty CD

4.00%

$5,950

Wealthfront Cash Account

3.55%

$5,281

Municipal money fund (not your state's)

1.45%

$3,498

Merrill Edge

0.01%

$15

Why Treasuries win in Kentucky

Savings accounts, CDs and most money funds pay interest that Kentucky taxes at up to 3.50%. Treasury bills don’t. So a Treasury bill paying 4.50% keeps what a fully taxable account paying 4.76% would, for a top-bracket Kentucky resident. Today the best 1-year CD we track pays 4.65% and the best savings account 3.55%.

Municipal money funds in Kentucky

We don’t list a money fund that holds only Kentucky municipal debt. A national municipal fund is free of federal tax but generally taxed by Kentucky; for a top-bracket resident it needs at least 2.94% to beat a 1-year Treasury bill.

Kentucky taxes on cash, in brief

Top income tax rate: 3.50%, a flat rate on all income. 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 Kentucky, except the share of a fund’s income that comes from U.S. Treasuries.
Some Kentucky cities or counties also levy a local income tax. Where it covers interest, Treasuries are exempt from it too, which widens their edge.

Questions

Is Treasury bill interest taxed in Kentucky?

No. Interest on U.S. Treasury bills, notes and bonds is exempt from state and local income tax under federal law, so Kentucky doesn’t tax it. It is still subject to federal income tax. Interest from savings accounts and CDs is taxed by Kentucky at up to 3.50%.

Where should I keep cash in Kentucky?

At Kentucky’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 Kentucky?

At Kentucky’s top rate and 37% federal, a CD or savings account needs at least 4.76% 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 →