A Treasury bill is taxable by which entity?

A Treasury bill is taxable by which entity?

• A. States only
• B. Federal government only
• C. States and municipalities
• D. States, municipalities, and federal government

Answer: (B)

Interest from Treasury bills is taxed by the federal government at the federal level, not by states or municipalities. The federal government collects the tax on the interest income you earn from U.S. Treasury securities, while that interest is typically exempt from state and local income taxes. So the entity that taxes a Treasury bill is the federal government only. This differs from many other bonds where state or local taxes can apply, or where some bonds may be exempt from federal tax in addition to state taxes.

Interest from Treasury bills is taxed by the federal government at the federal level, not by states or municipalities. The federal government collects the tax on the interest income you earn from U.S. Treasury securities, while that interest is typically exempt from state and local income taxes. So the entity that taxes a Treasury bill is the federal government only. This differs from many other bonds where state or local taxes can apply, or where some bonds may be exempt from federal tax in addition to state taxes.