Capital losses first offset capital gains, then up to a maximum of $3,000 of remaining losses can appear on form 1040 line 7 to offset other income such as the taxable amount of the Roth conversion. Losses that cannot be used are carried forward to future years. With $25,000 of taxable Roth conversion and no other losses such as a net loss from self-employment, your total income on Form 1040 line 9 cannot be less than $22,000.
