There is a flow in your logic, you separated the limit then you did it part by part.
This is correct on it's own:
$\lim_{x\to\infty} (1+\frac{1}{x})^x = e$
This is correct on it's own as well $\lim_{x\to\infty} (\frac{1}{x}) = 0$
This part is nonesensical jumoing to conclusion:
Thus,
$$\lim_{x\to\infty} (1+0)^x = e$$
because the correct version is this $\lim_{x\to\infty} (1+0)^x = 1$
Finally, $1^{\infty} = e$. Incorrect conclusion
Why is this incorrect? Can anyone explain where the math is wrong?
Math is not wrong, the logic is wrong, limit of a function is not same as function of the limit $(1+\frac{1}{x})^x$ is a function but you are applying the limit to some parts first then to the other parts, limit must be applied the whole, not part by part.