If you sell securities at a loss ("capital loss"), then the loss will first offset any capital gains you might have. If there's still any loss remaining, you get to use a max of $3000 on your current year tax return to offset ordinary income. It will show up as a negative 3000 on line 13 of the 1040 and be subtracted from your other sources of income.
This process repeats itself each year until the loss is exhausted.
