A structure and a formation method of a semiconductor device are provided. The method includes forming an etch stop layer over a semiconductor substrate and forming a magnetic element over the etch stop layer. The method also includes forming an isolation element extending across the magnetic element. The isolation element partially covers the top surface of the magnetic element and partially covers sidewall surfaces of the magnetic element. The method further includes forming a conductive line over the isolation element. In addition, the method includes forming a dielectric layer over the conductive line, the isolation element, and the magnetic element.