Interest from Treasury bills (T-bills) is subject to federal income taxes but not state or local taxes.

i think we were typing at the same time.

i think we were typing at the same time.

at Treasury Direct for T-bills, notes, or bonds. My impression is that auctions on Tbills are held often enough that one doesn't have to wait long (i.e. have idle money sitting around or earning less), but for longer maturity stuff, it can be a big wait for the next option. So I bought a TIPS a couple years ago with 5 years to maturity at Vanguard on the secondary market. But probably not a good way (Vanguard) to get short maturity stuff like Tbills.

mahatmakanejeeves, a frequent poster in this forum, seems to do this all the time:
https://www.democraticunderground.com/11215346#post2

I remember by the thumb rule, "jurisdictions tax their own but not each other's"

Treasury bills are free from state and local taxes, but the interest paid to the holder is not exempt from federal taxes.

They are, as you probably know, called "Zero Coupon Bonds" as they do not pay periodic interest payments, but instead are bought at a discount to their par value, or the amount they are redeemed for, which is in multiples of $100.00. The difference between the purchase price and their redemption value is the interest. Currently the 90 day is paying 5.38% but it is important to remember that this is an annualized yield. In order to actually realize five dollars and 38 cents in interest on a 90 day, $100 face value bill, you would have to buy 4 successive bills at the same rate in order to achieve that. Since rates fluctuate on a daily basis, this might not happen. Of course if you buy the 52 week paper, that becomes moot.

One thing that can arise with zeroes is owing "phantom interest" or owing taxes on interest you have yet to receive. This isn't really a problem until you start talking about 6 figure purchases. Talk to your tax advisor on this point.

They are extremely liquid and settle Same Day, as opposed to Trade-Plus-Three that has historically been the standard for most other types of securities. If you do sell before maturity, you are entitled to all the accrued interest up to that point, so you aren't losing anything. And yes, the buying process should be the same as for other purchases you have made through Treasury Direct.

Here's their page on this paper;

https://www.treasurydirect.gov/marketable-securities/treasury-bills/

Best of luck and may all your trades be net gains!