With the end of the financial year rapidly approaching, investors may be reviewing which tax deductions they can claim. 

Tax deductions are out of pocket expenses that can be listed on your tax return to reduce taxable income. Ultimately, the more deductions you claim, the higher your tax refund could be. 

The complexity of tax rules often deters investors from making deductions. Technicalities can get in the way, rendering certain expenses in the 'too hard' basket. However, with a bit of education, investors can understand what is required for certain expenses to qualify.

Let's explore the rules surrounding three tax deductions that many investors forget to claim.

Interest

Most Australians are aware that interest paid on an investment property is deductible. Negative gearing on investment properties is common in Australia. As of 2024, nearly half of all Australian landlords had negatively geared properties.

It is less widely known that interest paid on borrowed funds to purchase shares is also deductible. The only catch is that the shares purchased with borrowed funds must be 'income producing'. In other words, they must pay dividends. 

This means that if you've borrowed money to buy shares in Telstra Ltd (ASX: TLS) or Commonwealth Bank of Australia (ASX: CBA), you can deduct the interest expense on that loan from your dividend income. This lowers your taxable income while also allowing your portfolio to grow in value.

However, interest on money borrowed to buy shares that don't pay dividends is not deductible. For example, US stocks like Tesla Inc (NASDAQ: TSLA) and Berkshire Hathaway (NYSE: BRK.B) don't pay dividends.

Subscriptions and seminars

Investors can also deduct payments for investment research expenses. For example, this may be a subscription to a newsletter that provides information on an existing investment. However, once again, the investment must generate investment income (i.e., dividend-paying stocks). 

Similarly, if you attend a seminar about an existing investment that generates income, you can claim this expense. In the case of both subscriptions and seminars, you can't claim a deduction related to a written or oral presentation on something you're considering investing in, even if you end up investing in it.

Professional advice

Finally, investors can claim specific professional advice fees. However, once again, the advice must relate to an existing investment or relate to changing their investments. Initial consultations about getting started as an investor are not deductible.