How Much Is Closing the Bank Gap Worth in Your State?

The Bank Gap, the difference between the average savings rate and the best available one, is a single national number: 3.72 percentage points, worth $930 a year in pretax interest on a $25,000 balance, identical everywhere in the country. What closing that gap is actually worth after tax is not identical everywhere: it ranges from about $725 a year in states with no income tax down to $602 in California, an erosion driven entirely by state tax law, not by anything different about the accounts themselves. This report ranks all 50 states. Figures last verified recently.

The numbers

• The national gap. 3.72 percentage points between the 0.38% national-average savings rate and the 4.10% best widely available rate, per the Bank Gap Index, as of August 2026.
• The pretax value. $930 a year on a $25,000 representative balance, identical in every state.
• The best after-tax outcome. About $725 a year in the nine states with no income tax.
• The worst after-tax outcome. About $602 a year in California, a roughly 17% reduction from the no-tax-state figure.

Why the same gap is worth different amounts

Savings account interest is ordinary income, taxed at the federal level everywhere and at the state level wherever a state chooses to tax it. The Bank Gap itself measures a difference in pretax rates, so it doesn't change from state to state. But the value of actually closing that gap, moving from the national-average account to the best available one, is an after-tax outcome, and that number shrinks by whatever your state takes off the top. A no-income-tax resident keeps the entire pretax gap after federal tax alone; a California resident loses an additional 13.3 percentage points of that gain to the state, on top of the same federal bite everyone pays.

Every state, ranked

The table below applies each state's published top marginal interest-tax rate against the national $930 pretax gap, at a representative 22% federal bracket, to estimate the after-tax value of closing the Bank Gap on a $25,000 balance in that state.

The five states where a Treasury fund matters most

California, Hawaii, New York, New Jersey, and Oregon occupy the bottom five spots in this ranking for the same reason: they tax interest income at the highest marginal rates in the country. For residents of these states specifically, there's a second lever beyond simply moving to the best-paying savings account: Treasury income is exempt from state and local tax, so a Treasury-only money market fund can preserve more of its after-tax yield than a savings account, even at a similar or modestly lower headline rate. SwitchWize's companion deep-dive works through the full math, and a practical setup guide covers exactly how to hold one in an ordinary brokerage account.

The honest counterargument

This ranking uses a representative $25,000 balance and a 22% federal bracket; your own numbers will scale the dollar figures up or down, though the relative ranking between states holds regardless of balance size, since it's driven entirely by the tax-rate differences, not the dollar amount. It also uses each state's single top marginal rate rather than a full bracket schedule, so a saver well under their state's top bracket will see a smaller state-tax bite than shown here, and the after-tax figure for that person sits somewhere between the no-tax-state number and the figure listed for their state. Treat the ranking as an ordering of which states erode the gap more or less, not a precise personal quote.

Methodology

The national Bank Gap figures (3.72-percentage-point gap, 0.38% national average, 4.10% best available rate, $25,000 representative balance, $930 pretax value) are SwitchWize's own Bank Gap Index data as of the August 2026 monthly snapshot. Each state's top marginal interest-tax rate is SwitchWize's own maintained state-tax dataset, used consistently across its state-level Bank Gap content. The after-tax value applies a representative 22% federal bracket plus each state's top rate to the $930 pretax figure; this is an illustrative, order-of-magnitude calculation, not a personal tax computation, and does not account for state-specific standard deductions, bracket structure below the top rate, or local (city/county) taxes beyond the state rate shown.

How we source this. National rate-gap figures are SwitchWize's own tracked Bank Gap Index data; state tax rates are SwitchWize's own maintained dataset, cross-referenced against published state tax law. See our methodology and editorial team. This report was written by a former bank treasurer and reviewed by the SwitchWize Research Desk. We take no payment for organic rankings or citations.