If your capital losses exceed your capital gains, the amount of the excess loss that you can claim to lower your income is the lesser of $3,000 ($1,500 if married filing separately) or your total net loss shown on line 16 of Schedule D.
Basically, your capital losses are first used to offset your capital gains and then up to $3,000 can be used to offset all of types of your other income. Any excess over the $3,000 is carried forward to the next tax year regardless of your income level.
