SGOV vs a high-yield savings account after tax
SGOV, the iShares 0-3 Month Treasury Bond ETF, holds very short-term Treasury bills. A high-yield savings account pays bank interest. Both are taxed federally, but most of SGOV's payout is exempt from state income tax, while bank interest is not. So the useful question is: what savings rate do you need to beat SGOV in your state?
The numbers we start from
- SGOV yield: 3.75% (30-day SEC yield, Oct 20, 2026), from the iShares fund page. The SEC yield is reported after fund expenses; SGOV's expense ratio is 0.09%.
- State-exempt share: iShares reported that 95.14% of SGOV's 2025 income came from U.S. government obligations, and marked SGOV as holding at least 50% federal obligations at every quarter-end, which matters in California, Connecticut and New York (iShares 2025 document).
- Savings account: we don't track bank rates or recommend banks. Instead we work out the break-even APY, the rate a fully state-taxable account must pay to match SGOV after state tax. Compare it with any offer you're considering.
The break-even formula
After state tax, SGOV keeps yield × (1 − state rate × (1 − exempt share)). A savings account paying APY a keeps a × (1 − state rate). Set them equal and solve:
break-even APY = SGOV yield × (1 − state rate × (1 − exempt share)) ÷ (1 − state rate)
We apply the same federal rate to both, so federal tax doesn't change which one comes out ahead, and it isn't in the formula. Bank interest gets no state exemption because it isn't interest on a U.S. obligation, so 31 U.S.C. § 3124 doesn't apply, and the IRS treats it as ordinary taxable interest (Topic 403).
Break-even savings rates by state
| State | Rate at $100k single | Break-even APY | Top rate | Break-even APY |
|---|---|---|---|---|
| California | 9.30% | 4.12% | 13.30% | 4.30% |
| New York | 5.90% | 3.97% | 10.90% | 4.19% |
| New Jersey | 6.37% | 3.99% | 10.75% | 4.18% |
| Massachusetts | 5.00% | 3.94% | 9.00% | 4.10% |
| Connecticut | 6.00% | 3.98% | 6.99% | 4.02% |
| Illinois | 4.95% | 3.94% | 4.95% | 3.94% |
| Texas | 0.00% | 3.75% | 0.00% | 3.75% |
| Florida | 0.00% | 3.75% | 0.00% | 3.75% |
Live figures as of Oct 21, 2026, 5:25 PM CT; each yield carries its own source date. State brackets: Tax Foundation 2026, single filer. Local income taxes (e.g. New York City) are not included and would raise the break-even.
In Texas and Florida there's no state income tax, so the break-even is simply SGOV's own yield. In New York at the top rate, a savings account needs about 4.19% to keep up.
Worked example: $50,000 for a year in California
Take a single Californian with about $100,000 of taxable income, a 9.30% marginal state rate. Suppose $50,000 earns SGOV's current 3.75% for a full year. Rates won't actually stay put, so this is an illustration, not a forecast.
- SGOV income: about $1,875. Only the non-exempt 4.86% is taxed by California, so state tax is about $8.
- A savings account earning the same $1,875 would owe about $174 in California tax, all of it taxable.
- To come out even after state tax, the account would need an APY of about 4.12%, versus SGOV's 3.75% headline.
The difference is roughly $166 a year on $50,000 at this bracket. It grows with the balance and the tax rate, and shrinks to nothing in a no-tax state.
What the after-tax math leaves out
- Deposit insurance. The FDIC insures deposits "to at least $250,000 per depositor, per ownership category at each FDIC-insured bank." It lists Treasury bills and mutual funds among products it does not cover. SGOV is a fund, so it isn't FDIC-insured, though its holdings are Treasury bills.
- Yield measures. A bank quotes APY. SGOV's 30-day SEC yield is a standardized trailing measure. Neither is guaranteed, and both move with short-term rates.
- Access. An ETF is sold on an exchange during market hours at a market price, with a bid-ask spread. Savings withdrawals go through your bank's transfer process.
- The exempt share is last year's. The 2026 share will be published after year-end and may differ from 2025's 95.14%.
Run the numbers for your own situation
Three inputs decide the answer: your marginal state rate (not your average rate), SGOV's current SEC yield, and the savings APY you're offered. Plug them into the break-even formula above. If the offered APY is below the break-even, SGOV keeps more after state tax; if it's above, the savings account does. If you live in a city with its own income tax, add that rate to the state rate, which pushes the break-even higher. Because both yields float, the answer can flip as rates move, so it's worth rechecking when either one changes.
For the same comparison against other Treasury funds, see SGOV vs VUSXX and SGOV vs BIL, or the full ranking on your state's page.
Frequently asked questions
What savings rate beats SGOV in California?
At a 9.3% marginal rate, a fully taxable savings account needs about 4.12% to match SGOV’s current 3.75% after state tax; at the 13.3% top rate, about 4.30%. Figures update with SGOV’s yield.
What about Texas or Florida?
Neither has a state income tax, so the exemption doesn’t matter and you can compare the headline rates directly, keeping in mind that an APY and a 30-day SEC yield are different measures.
Is SGOV FDIC-insured?
No. SGOV is an exchange-traded fund, and the FDIC lists mutual funds and Treasury securities among the products it does not insure. Its holdings are U.S. Treasury bills.
Is all of SGOV’s dividend state-tax-free?
Not quite. iShares reported that 95.14% of SGOV’s 2025 income came from U.S. government obligations, so in most states that share can be exempt and the rest is taxable.