Treasury bills are short-term securities issued by the U.S. government. They are among the safest investments in the world, due both to their short time to maturity and their U.S. government guarantee. Treasury bills don't make regular interest payments, as with bonds. Rather, Treasury bills are bought at a discount to their maturity price. Over time, they rise in value until they pay off in whole at maturity. The difference between what you pay for a Treasury bill and what you receive at maturity is your interest. If you sell before maturity, you won't receive your full interest.
Deposit your Treasury bills in a brokerage account. If you originally bought your Treasuries through a broker, your bills are likely already in the account. If you used the government's Treasury Direct program, you'll still have to deposit the bills in an account, since the government no longer buys bills back directly from investors.
Get a bid. A bid is the highest price that an investor is willing to pay for a security. Although Treasury bills don't fluctuate much in value, you may get competing bids, some higher and some lower, on any given day for your bills. Ask your broker to find the highest available price, or enter the order yourself via your brokerage's online trading platform, if they have the capability.
Determine if your brokerage will charge a commission. Many firms won't charge any fees to buy or sell Treasury securities. However, if your broker does, that money will come directly out of your sales proceeds. Since the investment return on Treasury bills is normally fairly low, any type of commission or fee could greatly reduce your profits. If you're charged a fee, evaluate your sale to make sure it makes investment sense. If it's too high, consider transferring your Treasury bills to a no-fee broker for the sale.
Enter the order. If you receive a bid price that you find acceptable, or if you simply need to liquidate your Treasury bills regardless of the price you receive, accept the price and execute the trade. You'll receive proceeds equal to the price you agree on, less any fees or commissions. You'll no longer own the rights to any future profits in your Treasury bills.
Pay your taxes. Any gain you receive on the sale of a Treasury bill counts as interest on your taxes, rather than a capital gain. You'll pay ordinary income tax at the same rate as your regular wages or salary. These taxes aren't due at the time of sale, but rather when you file your income tax return for the year.
- Treasury Direct: Selling Treasury Bills, Notes, Bonds, or TIPS
- InvestinginBonds.com: How to Buy and Sell U.S. Treasury Securities
- Treasury Direct: Interest Income Reporting for Marketable Treasury Securities
- Internal Revenue Service. "Topic No. 403 Interest Received." Accessed Aug. 14, 2020.
- U.S. Department of the Treasury. "Treasury Bills: Tax Considerations." Accessed Aug. 14, 2020.
- U.S. Department of the Treasury. "Treasury Bills in Depth." Accessed Aug. 14, 2020.
- Internal Revenue Service. "Topic No. 409 Capital Gains and Losses." Accessed Aug. 14, 2020.
- U.S. Department of the Treasury. "Daily Treasury Yield Curves." Accessed Aug. 14, 2020.
- New York State. "2019 Instructions for Form IT-201," Page 57. Accessed Aug. 14, 2020.
John Csiszar earned a Certified Financial Planner designation and served for 18 years as an investment counselor before becoming a writing and editing contractor for various private clients. In addition to writing thousands of articles for various online publications, he has published five educational books for young adults.