A growing number of Canadian parents are offering their adult children cash to leave home and move into a place of their own, and that has been one factor in a surging percentage of people living alone, especially among those age 55 and older. While the result may produce independence and freedom, living alone comes at a financial cost that many loners are unprepared for. Janet Grey of the Canadian Association of Retired Persons said many senior women tell her “there's an injustice, almost a penalty, for being single.”
A Canadian Imperial Bank of Commerce poll shows 76 per cent of Canadian parents would give their child age 18 or older living at home an average of $24,000 to move out, get married or move in with a partner. Meanwhile, the Statistics Canada 2016 census poll indicated 28.2 per cent of all Canadian households consisted of only one person, the highest since Confederation in 1867, and up from 7.4 per cent in 1951. Alberta, with the youngest average age among provinces and territories, understandably has the lowest percentage of single-person households at 24 percent.
There are no gift taxes in Canada for recipients. But parents should first consider whether they might need the money themselves in retirement and whether their son or daughter will use the money wisely. It may be best to stipulate that the gift goes towards a mortgage down payment which would give the child an investment plus shelter. Also, people near or in retirement could be forsaking rental income from a working adult child leaving the nest. Many household expenses have to be paid regardless of the number of occupants, such as property tax, house insurance, utilities, plus perhaps mortgage and condo fees, so being able to deduct a portion of those expenses essentially makes rental income from a child tax-free for parents.
Stats Canada says the increase in one-person households is due to a number of social, economic and demographic factors. “Income redistribution, pensions and the increased presence of women in the workforce have led to more people being economically independent today than in the past, especially in older age groups. In addition, higher separation and divorce rates have led to more people living alone. Finally, population aging and a higher life expectancy have also contributed to the increase in one-person households, given that a larger share of seniors live alone as compared to other age groups.” Women account for 53.7 per cent of one-person households due to longer life expectancy and usually being younger than their spouses, although the percentage has decreased since the 1970s.
Living alone has a number of financial disadvantages. While the adage that two people can live as cheaply as one isn't quite true, Grey says single people pay 75 to 80 per cent of what couples pay in household costs. On the tax front, spouses and common-law partners can split up to 50 per cent of pension income, usually from the higher income earner to the earner in a lower tax bracket. That includes income from a company pension at any age, and after age 65 from a Registered Retirement Income Fund, Locked-In Retirement Fund or regular withdrawals from a Registered Retirement Savings Plan. That allows couples to preserve more of the age amount tax credits and Old Age Security benefits. Transferring $2,000 from a pensioner to a spouse or partner without pension allows both people to claim the pension income tax credit. One person can claim a credit for a spouse or partner making less than $11,635. Couples can combine medical expenses to get more tax credits. And charitable donations can be combined so only one person receives the lower credit on the first $200. For tax purposes unwed people file as common-law after living together in a conjugal relationship for at least a year, or once they've had a child together.
Living alone is affecting other industries, such as Intrepid Travel which reports 71 per cent of Canadians are more comfortable travelling alone than ever before, and travel companies are offering bachelor accommodations to reduce prices for people not claiming double occupancy rates.
Ray Turchansky is a tax and personal finance consultant.
