If you have a capital loss, up to 3,000 will applies against other income in the current year.
For example:
- 100,000 in wage income (W-2)
- 500 in interest income
- 10,000 in capital losses
3,000 of the capital losses will be subtracted from other income.
100,000 wages + 500 interest income - 3,000 capital loss = 97,500 adjusted gross income.
The remaining 7,000 capital loss will carryforward to the next tax year.
Hopefully this helps illustrate the concept for you!
This article is a helpful overview of this topic as well: Capital Gains and Losses
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