The term 'excess' is confusing. I prefer the explanation in this TurboTax Help.
- Capital losses first offset losses of the same kind, short-term against short-term or long-term against long-term.
- Net losses of either type can then be deducted against the other kind of gain.
In this example, ST capital gains of $1,913 are reduced by LT capital loss of $8,902 resulting in a loss of $6,989
Finally, If you have an overall net capital loss for the year, you can deduct up to $3,000 of that loss against other kinds of income, including your salary and interest income.