Treasury Bills for US Expats: State-Tax-Free Yield

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US Treasury bills pay expats 3.59-3.68% (as of June 2026), exempt every dollar of that yield from state income tax, and require zero FBAR reporting — making them one of the cleanest short-term cash vehicles available to Americans living outside the United States. Most expat financial guides skip T-bills entirely because they feel complicated to access from abroad. They're not.

If you have a Charles Schwab International account, you can place a T-bill order in the same place you'd buy a stock. If you use Interactive Brokers, the secondary market is always open. The harder question is not how to buy but why T-bills beat the alternatives once you are living outside the US — and what the tax picture looks like on your annual Form 1040.

What Are Treasury Bills and Why Do They Matter for Expats?

Treasury bills are short-term US government debt instruments issued at a discount and maturing at face value, with no periodic interest payment — the entire return is the difference between your purchase price and the $1,000 par value you receive at maturity. Terms run from 4 weeks to 52 weeks, which means you can effectively park cash in rolling 4-week cycles with zero credit risk and competitive market yields.

For Americans abroad, three features make T-bills distinctively useful:

• No state income tax on the interest. If you maintain domicile in California, New York, or any other state, the state cannot tax US Treasury interest by federal law.
• No FBAR filing required. T-bills held at a US brokerage are not foreign financial accounts, so they don't appear on FinCEN Form 114.
• No currency risk. Everything settles in USD at a US institution, which matters when you're already managing currency exposure between your spending and earning currencies.

These properties are different from everything else an expat might otherwise park cash in. A foreign high-yield savings account gives you better liquidity but requires FBAR filing if the balance exceeds $10,000, carries currency risk, and is fully subject to any state tax you owe. A foreign money market fund may be a PFIC trap that creates a compliance nightmare at tax time. A US savings account earns almost nothing. T-bills sit in a small gap where you get competitive yields without the foreign account complexity.

How Can Expats Actually Buy T-Bills From Abroad?

The short answer is that TreasuryDirect.gov does not work for expats with foreign mailing addresses — but US brokerage accounts do, and both Charles Schwab International and Interactive Brokers allow expats to purchase T-bills directly.

TreasuryDirect requires a US bank account and US mailing address to open. If you moved abroad and already have an existing TreasuryDirect account, you may be able to maintain it by keeping a US bank account linked, but new account openings require domestic setup first.

The practical route for most expats is through a US brokerage that accepts international addresses:

Charles Schwab International: Schwab's international accounts accept non-US addresses and offer both new-issue T-bill auctions (you submit your order and receive the auction price) and secondary market purchases. Schwab also offers an auto-roll feature that automatically reinvests maturing T-bills into the next available auction — available for durations up to six months. This auto-roll eliminates the manual work of managing short-term positions.

Interactive Brokers (IBKR): IBKR was built for international clients and handles non-US addresses without complication. They offer secondary market T-bill trading, so you can buy any outstanding bill at current market prices. IBKR's fixed income interface is more complex than Schwab's but gives you access to a wider range of maturities.

Why Is the State Tax Exemption Such a Big Deal?

Under 31 USC § 3124, interest on obligations of the United States is exempt from taxation by any state or municipal authority — this applies to T-bill interest, T-note coupon payments, T-bond interest, and I-bond interest alike, and it applies regardless of where you live or which state considers you a domiciliary.

For expats who maintain domicile in high-tax states — California (13.3% top rate), New York (10.9%), New Jersey, Oregon — the state exemption adds material value to every T-bill position. On $100,000 in T-bills earning 3.65%, the California tax alone would be about $484 per year if the interest were taxable. On a $500,000 cash reserve, that's $2,420 per year that stays in your pocket compared to a money market fund or HYSA invested in non-Treasury assets.

A practical note: the exemption applies only to interest income, not to capital gains if you sell a T-bill in the secondary market before maturity. If you buy a T-bill in the secondary market and sell it before maturity, any gain on the sale can be taxable at the state level. For a buy-and-hold-to-maturity strategy, the entire return is exempt.

Do T-Bills Count as Foreign Financial Accounts for FBAR?

No — T-bills held at a US brokerage (Charles Schwab, IBKR, Fidelity) are not foreign financial accounts and are not reportable on FinCEN Form 114 (FBAR). FBAR applies only to accounts at institutions located outside the United States. A T-bill purchased through your Schwab account stays in a domestic US account.

This matters because expat financial life already involves substantial foreign account reporting. If you hold a checking account abroad, a foreign savings account, or foreign brokerage positions, those accounts aggregate toward the $10,000 FBAR threshold and require annual filing. Adding a large cash reserve in foreign-denominated instruments adds more accounts to manage. T-bills side-step this entirely — the brokerage account holding the T-bills may itself be a US account not subject to FBAR, and the T-bills are US government obligations not foreign assets.

For more on managing the full foreign account reporting picture, see the FBAR expat filing guide.

T-Bills vs I-Bonds vs Foreign HYSAs: Which Wins?

The right choice depends on your time horizon, domicile state, tolerance for foreign account complexity, and how much you need to deploy — T-bills are the strongest option for large cash reserves with medium-term (4–52 week) deployment windows and for anyone maintaining domicile in a high-tax state.

Option	2026 Yield	State Tax	FBAR	Expat Access
US T-Bills (4-week)	~3.59%	Fully exempt	Not required	Via Schwab or IBKR
US T-Bills (13-week)	~3.68%	Fully exempt	Not required	Via Schwab or IBKR
I-Bonds	Inflation-indexed	Exempt	Not required	Difficult (TreasuryDirect needs US address)
US HYSA (e.g., online bank)	3.50–4.50%	Fully taxable	Not required (US account)	Varies by bank
Foreign HYSA	3.00–5.50%	Fully taxable	Required if >$10K	Easy to open locally

I-Bonds have a $10,000 annual purchase limit per person, a 30-day lockup after purchase, and a five-year early redemption penalty (you forfeit the last three months of interest). They're excellent for a small inflation hedge inside a larger strategy, but you can't park $200,000 in I-bonds the way you can with T-bills.

Foreign HYSAs sometimes offer higher nominal yields but introduce three layers of complexity: currency conversion costs, FBAR compliance if the account exceeds $10,000, and state income tax on the interest (since foreign account interest is not exempt). For expats already doing the FBAR math, adding a large foreign savings account for a 0.5% yield advantage over a T-bill is often not worth the reporting burden.

See the broader comparison of expat investment vehicles and PFIC traps before putting significant capital into foreign-domiciled funds or ETFs.

How to Build a T-Bill Ladder From Abroad

A T-bill ladder staggers your maturities so a portion of your cash becomes available at regular intervals — say every four weeks — while the rest remains invested at longer terms for slightly higher yields. This avoids locking everything into a single 52-week bill when you might need some of the cash in eight weeks.

A simple four-rung ladder for $100,000 (all amounts approximate):

1. $25,000 in 4-week T-bills — matures in one month, rolls into the next available 4-week bill automatically (with Schwab auto-roll)
2. $25,000 in 8-week T-bills — matures in two months
3. $25,000 in 13-week T-bills — matures in three months, higher yield than shorter terms
4. $25,000 in 26-week T-bills — matures in six months, captures the longer end of the short curve

As each rung matures, you can reinvest at the longest term available (26-week) to maintain exposure to the higher yields, or redirect to operating expenses depending on your cash needs. Schwab's auto-roll feature handles the reinvestment automatically for terms up to six months. At Interactive Brokers you'll reinvest manually via the secondary market, which typically takes less than five minutes.

How Is T-Bill Income Taxed and Reported on Your 1040?

T-bill interest is ordinary investment income subject to federal income tax and reported on Schedule B of Form 1040 — it is NOT eligible for the Foreign Earned Income Exclusion (FEIE) or the Foreign Tax Credit, because it is investment income, not earned income from services.

Your US brokerage will issue a Form 1099-INT (or 1099-OID for original issue discount) showing the interest earned in Box 3, labeled "Interest on U.S. Savings Bonds and Treasury obligations." You report this on Schedule B. If you have multiple T-bill positions across different terms, your brokerage will aggregate them into a single 1099-INT.

The state tax exempt portion of the interest needs a separate line on most state returns to claim the deduction. Some states have their own form or worksheet; others have you note it directly on your state Schedule B equivalent. If you are domiciled in a state that taxes income, confirm with your preparer how to report the Treasury income on the state return to claim the exemption correctly.

T-bill interest counts as ordinary income for federal purposes and is taxed at your marginal rate. On large balances, this means the after-tax yield is lower than the stated rate — but the state exemption partially offsets that, especially for high-state-tax domicile holders. At a 32% federal rate plus 13.3% California state rate (on a non-Treasury instrument), the combined marginal rate on investment income approaches 45%. On T-bills, the effective combined rate is just the 32% federal rate — the state tax is zero by statute.

For an overview of how investment income fits into your annual expat filing structure, the US expat banking and taxes guide walks through the full reporting stack.

Who Benefits Most from a T-Bill Strategy Abroad?

T-bills work best for expats who:

• Maintain domicile in California, New York, New Jersey, Oregon, or another state with income tax above 7%
• Have more than $25,000 in USD reserves they don't need for 4–26 weeks
• Already have Charles Schwab International or IBKR set up (or are willing to set them up)
• Want to avoid adding foreign accounts to their FBAR filing
• Are managing a larger investment portfolio and want a safe, liquid, cash-like allocation in USD

T-bills are less useful if your entire liquid reserve is $5,000 (the yield benefit is small in absolute terms), if you need true instant liquidity (T-bills take one business day to settle in the secondary market, and new-issue auctions settle in a few days), or if you have no US brokerage account at all and don't want to open one.

For expats building a longer-term investment portfolio abroad, T-bills pair well with a US brokerage holding domestic stock and bond index funds — keeping a year of operating expenses in short T-bills while the growth assets compound without the PFIC complexity of foreign-domiciled funds. See our overview of which US brokerages work for expats for the full picture on account options.

Sources checked June 2026: Federal Reserve H.15 Selected Interest Rates for current T-bill yields; 31 USC § 3124 for state tax exemption; IRS Schedule B instructions for federal reporting; FinCEN FBAR guidance for reporting scope. T-bill yields are updated at each Treasury auction and change with market conditions.

Disclaimer: This article is for educational purposes only and is not tax or investment advice. Tax rules and yields change frequently. Consult a licensed tax advisor or financial planner before making decisions about cash management, brokerage selection, or investment strategy while living abroad.