What is the primary purpose of a 1098 form?

The primary purpose of a 1098 form is to report mortgage interest that a taxpayer has paid during the year. This form is issued by lenders to homeowners who have taken out a mortgage. It provides essential documentation for taxpayers to itemize their deductions on their federal income tax returns, particularly in regard to the mortgage interest deduction allowed by the IRS. This deduction can significantly reduce a homeowner's taxable income, making it an important consideration for those who qualify.

In contrast, the other options focus on different types of financial documentation and reporting. For instance, while student loan interest payments are recorded on a different form known as the 1098-E, health care expenses do not have a specific form like the 1098, and dividend income is typically reported using a 1099-DIV. Each form serves its own unique purpose, with the 1098 specifically tailored for reporting mortgage interest.