What is the purpose of Form 1098?

Form 1098 is specifically designed to report mortgage interest paid during the tax year. When you take out a mortgage, the lender is obligated to send you this form if you have paid $600 or more in interest over the course of the year. This form is crucial for taxpayers because it allows them to accurately claim mortgage interest deductions, a significant advantage on their tax returns. The amount reported on Form 1098 can directly reduce taxable income, which can lead to substantial tax savings for individuals who itemize deductions.

The other options don’t align with Form 1098's purpose. For example, reporting wages refers to different forms like W-2, summarizing all of a taxpayer’s income involves forms like the 1040, and tracking capital gains pertains to Form 1099-B. Each of these forms serves distinct functions in the tax reporting landscape.