Ok. So here is the detailed and correct answer which I was able to figure out myself by looking at the formulas in the Capital Loss Carryforward Worksheet. It's more complex than I initially thought. Hopefully it can help other people in the same situation.
If your taxable income (1040 ln 15) is 0 or more then Capital Loss Carryover will be reduced by 3,000 (1,500 MFS) as VolvoGirl correctly pointed out.
If your taxable income is negative (note: Ln 15 will still show 0 but the actual calculation will give you negative number) then Capital Loss Carryover will be reduced by [3,000 (1,500 MFS) + taxable_income].
For example:
if your taxable income = -2000, then Carryover is reduced by [3000+ -2000]=1000
if your taxable income = -3000 (or -4000, or even less) than Carryover will not be reduced at all and you will get the whole amount of Capital Loss carried over to the next year. (which is what I was hoping for in my case, but unfortunately my taxable income is not negative.)
And TT does handle it correctly for the above examples.
