Bank Gap by State
The Bank Gap in Virginia
Virginia's top tax rate of 5.75% applies to savings interest statewide, but the real variable in Virginia is geography — Northern Virginia's cost of living runs well above the rest of the state.
Last reviewed August 7, 2026 · SwitchWize Research Desk
Before VA tax
$1,005/yr
on a $25,000 balance
After VA 5.75% tax
$947/yr
recoverable by switching
On a $25,000 balance, the gap is about $1,005 a year before tax. After Virginia's 5.75% top income-tax rate on the additional interest, you keep about $947. Because Treasury interest is exempt from Virginia income tax, routing that cash through a state-tax-exempt Treasury vehicle can recover most of the difference.
Estimated Bank Gap by balance
| Balance | Current earnings | Better-fit earnings | Estimated Bank Gap | After VA tax |
|---|---|---|---|---|
| $5,000 | $19 | $220 | $201 | $189 |
| $10,000 | $38 | $440 | $402 | $379 |
| $25,000 | $95 | $1,100 | $1,005 | $947 |
| $50,000 | $190 | $2,200 | $2,010 | $1,894 |
| $100,000 | $380 | $4,400 | $4,020 | $3,789 |
Estimates over 12 months at 0.38% current APY and 4.40% better-fit APY. The "After VA tax" column applies VA's 5.75% top income-tax rate to the additional interest; federal tax applies on top and is not shown. Example only — your result depends on your balance, rates, and time horizon.
Why Virginia changes the math
Virginia taxes interest income at a top rate of 5.75%. Treasury interest is exempt from that tax, giving higher-income Virginia savers a moderate after-tax edge from T-Bills or a government money market fund.
Northern Virginia, in the Washington D.C. orbit, carries living costs well above the rest of the state, which meaningfully raises typical emergency-fund sizing and the dollar value of the Bank Gap for savers in that region.
Cost of living in Virginia is above the national average, especially in Northern Virginia, which shapes how large an emergency fund needs to be and therefore how many dollars the Bank Gap quietly costs on idle cash.
Because Virginia taxes savings interest but not Treasury interest, the highest after-tax yield is not always the highest headline APY. Run your tax profile through the short-term savings tool to see whether a Treasury bill or government money market fund beats a taxable account for you.
Open the short-term savings toolFrequently asked questions
Does Virginia tax high-yield savings account interest?
Is a high-yield savings account worth it in Virginia?
Are T-Bills better than a HYSA for Virginia savers?
Your personal Bank Gap
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Calculate my Bank GapEducational information, not tax or financial advice. State tax rules are summarized at a high level and depend on your full situation. Rates are illustrative of current market conditions and should be confirmed with the provider. Confirm tax treatment with a qualified professional.