How do capital loss tax write offs work?

I have a question regarding how taxes work for capital losses. Looking at the situation below:

Income: 100k

Income taxes assuming 0 capital gains: 22k

Capital gains: 5k

Capital losses: 7k

Net capital gain/loss: -2k

Given the figures above, would I pay taxes on 98k worth of income or would I pay 22k in taxes and then the -2k in capital losses reduces my tax liability to 20k? I see the 3k number everywhere when I am trying to find the answer online. I just don’t understand if it’s a 3k reduction in total taxes or a 3k reduction in taxable income.

Sorry if the question doesn’t make sense, I can clarify if needed what I’m confused about.