You want your kids to get a good education, but the cost of a college degree can trigger some serious sticker shock. For example, for the 2017-2018 academic year:

• In-state tuition and fees at public four-year universities averaged $9,960 for the year1

• Out-of-state tuition and fees at public four-year universities averaged $25,620 annually1

• Private four-year universities cost an average of $34,470 annually for tuition and fees

And those numbers don't include additional costs for room and board, textbooks, and other college living expenses. According to Sallie Mae, today parents shoulder the burden for 23% of college expenses.2 If you're worried about the costs, opening a 529 College Savings Plan is a good way to prepare for those future tuition bills.

Here are some things you need to know about using a 529 plan to save for your child's college education.

When 529 plans were first created, they were designed to save for college education expenses only. As of 2018, though, parents can withdraw up to $10,000 per year3 to cover tuition costs for elementary or secondary school.

529 plan benefits

The main benefit of using a 529 plan is its tax-advantaged status. The money you save grows tax-free, as long as you use it to pay for qualified education expenses and your child attends an eligible education institution. (For college, that means any school that's eligible to participate in federal student aid programs.)

You pay no tax on any earnings from your 529 plan investments when you meet those conditions. Additionally, over 30 states4 offer either a tax deduction or credit for 529 contributions. Credits reduce your tax liability, while deductions lower your taxable income. Either way, this could mean paying less in state taxes. However, there's no federal tax break for 529 contributions.

Another benefit is that 529 plans come with generous lifetime contribution limits. Depending on the plan you choose (options and limits vary by state), the lifetime contribution limit may be up to $500,000.5 However, your contributions for the year can't exceed the annual gift tax exclusion limit. For 2018, the limit is $15,000,6 which means you can contribute up to that amount per child.

There's also one important tax rule to know about withdrawals: any earnings included in a 529 plan that isn't used for qualified education expenses are subject to a 10% tax penalty, plus regular income tax. Your original contributions wouldn't be taxed since they are made with after-tax dollars.

Opening a 529 college savings account

Opening a 529 account isn't that difficult. Once you find the plan you want to save in, you'll enroll yourself as the owner and your child as the beneficiary, then begin making contributions.

Every state offers at least one 529 savings plan. The great thing is, you can use any state's plan to save for college, regardless of where you live. As you're comparing plans, consider:

• Whether your state's plan offers a tax break

• Lifetime contribution limits

• The plan's investment choices

• Plan fees

Choosing a 529 plan is a big decision, and it's important to make sure you're picking the right one for your college savings goals. If you need help making sense of different plans available or opening one, Synovus can help. Having a trusted expert to help guide you can make the entire process much easier. Find a Synovus financial consultant near you to start the college savings conversation.7 

Important Disclosure Information

This content is general in nature and does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.

1. CollegeBoard, "Average Published Undergraduate Charges by Sector and by Carnegie Classification, 2017-18," CollegeBoard, May 2018.Back

2. Sallie Mae, "How America Pays for College 2017," Sallie Mae, May 2018. Back

3. Internal Revenue Service, "529 Plan: Questions and Answers," IRS.gov, May 2018. Back

4. SavingforCollege.com, "Name the top 7 benefits of 529 plans," May 2018. Back

5. SavingforCollege.com, "Compare by Features," May 2018. Back

6. Internal Revenue Service, "What's New - Estate and Gift Tax," IRS.gov, May 2018. Back

7. 529 plans are provided by Synovus Securities, Inc. ("SSI") and Creative Financial Group, a division of SSI. Synovus Securities, Inc., is a member of FINRA/SIPC. Investment products and services are not FDIC insured, are not deposits of or other obligations of Synovus Bank, are not guaranteed by Synovus Bank and involve investment risk, including possible loss of principal amount invested. Synovus Securities, Inc. is a subsidiary of Synovus Financial Corp and an affiliate of Synovus Bank. You can obtain more information about Synovus Securities, Inc. and its Registered Representatives by accessing BrokerCheck. 529 College Savings Plan information, including fees, expenses and sales charges, on the particular plan you select is available in the offering circular or official statement provided by the plan sponsor. Please read the information carefully prior to investing.

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