You don't have any choice or options about how your capital loss is used. There is only one way to do the calculations. TurboTax will automatically follow the IRS rules.
The long-term capital loss will offset both the long-term and short-term capital gains. In addition, $3,000 of the capital loss will be used to offset other income (ordinary income) provided that you have at least $3,000 of other income. The remaining capital loss is carried over to future years.
Each year the carried-over capital loss, plus any new capital losses, will first be used to offset any capital gains. Then up to $3,000 of the remaining capital loss will be used to offset other income. Any remaining unused capital loss will again be carried over to the next year. This process repeats each year until the entire capital loss has been used up.
If you happen to have a year where your taxable income is less than $3,000, then less than $3,000 of the capital loss will be used that year. If your taxable income is zero, none of the capital loss will be used. It will continue to be carried over.
