Updated October 27, 2026 from live rates
Where to keep cash in Massachusetts
Massachusetts’ top income tax rate is 9.00%. 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 5.25% to keep as much as a 1-year Treasury bill at 4.50%.
Why Treasuries win in Massachusetts
Savings accounts, CDs and most money funds pay interest that Massachusetts taxes at up to 9.00%. Treasury bills don’t. So a Treasury bill paying 4.50% keeps what a fully taxable account paying 5.25% would, for a top-bracket Massachusetts resident. Today the best 1-year CD we track pays 4.65% and the best savings account 3.55%.
Massachusetts municipal money funds
These hold Massachusetts municipal debt, so their income is generally free of both federal and Massachusetts income tax (and the 3.8% surtax). Their yields are lower, so they win only at high brackets. For a top-bracket resident, one needs to yield at least 2.83% to beat a 1-year Treasury bill.
- Fidelity Massachusetts Municipal Money Market Fund (FAUXX): check its current yield on the sponsor’s page
A small share of a state fund’s income can come from out-of-state or taxable sources; its yearly tax notice says how much.
Massachusetts taxes on cash, in brief
- Top income tax rate: 9.00%. 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 Massachusetts, except the share of a fund’s income that comes from U.S. Treasuries.
Questions
Is Treasury bill interest taxed in Massachusetts?
No. Interest on U.S. Treasury bills, notes and bonds is exempt from state and local income tax under federal law, so Massachusetts doesn’t tax it. It is still subject to federal income tax. Interest from savings accounts and CDs is taxed by Massachusetts at up to 9.00%.
Where should I keep cash in Massachusetts?
At Massachusetts’ 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 Massachusetts?
At Massachusetts’ top rate and 37% federal, a CD or savings account needs at least 5.25% to keep as much as a 1-year Treasury bill paying 4.50%.
Is a Massachusetts municipal money fund worth it?
Income from a Massachusetts municipal money fund is generally free of federal and Massachusetts income tax. To beat a 1-year Treasury bill at 4.50% for a top-bracket Massachusetts resident, it needs to yield at least 2.83%.
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 →