Now we are in full swing of the 2014 tax return season, many people will be looking at the price of their Bitcoins and other digital currencies and wondering if they even need to file taxes.

The overall trend in 2014 was a price decline, which would likely mean any trading or spending would not have generated a capital gain, and so there is simply no tax to pay.

This is true, and whilst you are supposed to report every sale of a capital asset, if there is no gain, there is no tax and so you would not owe anything.

However, you can use these to increase your tax refund.

Since Bitcoin and other digital currencies are property, as clarified in the IRS March 2014 notice, they are treated as capital assets and so subject to capital gains and losses.

This applies when you dispose of a coin in exchange for something, selling it, spending it or trading it with another alt-coin.

While anyone who used Bitcoin in 2013 probably saw gains, users in 2014 probably saw losses.

So for anyone trading or spending Bitcoins in 2014, it would be worthwhile to at least calculate the effect on capital gains, because there might well be a tax reduction.

For example, if you had spent 1 BTC around Oct 2014, which you had purchased back in 2013 when the price was $800, there is actually a capital loss of about $450. That's $450 of income that doesn't need to be taxed.

Gains and losses declared in 1040 Schedule D are combined and any remaining losses can reduce any other taxable income:

• Long-term gains and long-term losses are combined into a net long-term gain/loss

• Short-term gains and short-term losses are combined into a net short-term gain/loss

• The net long-term gain/loss is combined with the net short-term gain/loss for a total gain/loss.

• If the total is a loss, up to $3,000 can be used to reduce your other taxable income.

• Any losses over $3,000 are carried forward as losses into the next tax year.

A $3,000 taxable income reduction could save you $750 in taxes (if you are in the 25% tax bracket).

Losses must be declared in the year they occur. So have a look at any spending from 2014, import these figures into Bitcoin Taxes, and we'll work out the capital loss and hopefully increase any tax refund.