Aim To estimate the cost‐effectiveness of sequential addition of empagliflozin versus sitagliptin after metformin in patients with type 2 diabetes (T2D) with or without cardiovascular disease (CVD) from the perspective of the US healthcare payer. Methods An individual simulation model predicted lifetime diabetes‐related complications, using UKPDS‐OM2 equations in patients without CVD, and EMPA‐REG OUTCOME equations in patients with CVD. Additional US‐based sources informed inputs for population characteristics, adverse events, non‐CV death, treatment escalation, quality of life and costs. Costs and quality‐adjusted life‐years (QALYs) were discounted 3.0% annually. Results The incremental cost‐effectiveness ratio (ICER) for second‐line empagliflozin versus sitagliptin in the overall T2D population was $6967/QALY. Empagliflozin led to longer CVD‐free survival (0.07 years) and an 11% reduction in CV death in patients with CVD compared with sitagliptin. Empagliflozin resulted in greater benefits with greater costs in patients with versus without baseline CVD, yielding ICERs of $3589/QALY versus $12 577/QALY, respectively. Results were consistent across a range of deterministic and probabilistic sensitivity analyses and scenarios. Conclusion Compared with sitagliptin, empagliflozin was cost‐effective (at $50 000/QALY US threshold) as a second‐line treatment to metformin for T2D patients with or without CVD in the United States. Our findings lend additional support for more widespread adoption of guidelines by healthcare decision‐makers for T2D treatment.