It depends. If it is a long-term capital loss, then they both abide by the capital gains tax brackets. Therefore, the loss would decrease the amount of taxable capital gain income. If you had $1000 of qualified dividends, then a long-term capital loss of $1000 or more (up to the $3,000 capital loss cap for married filing jointly) would wipe out the qualified dividend income. A similar scenario occurs with short-term capital loss, but its impact is indirect. That income abides by the ordinary income tax brackets. A significant loss (again up to the $3,000 capital loss cap) may reduce the clients AGI enough that the taxable income threshold for capital gains is not breached. This would result in tax free qualified dividend income.