Tax liability refers to the total amount of tax that an individual or business is legally obligated to pay to the government. This amount is determined based on various factors, including income, deductions, and applicable tax rates. Tax liabilities can arise from different types of taxes, such as income tax, property tax, or sales tax. Understanding tax liability is essential for effective financial planning. Individuals and businesses must calculate their tax liabilities accurately to ensure compliance with tax laws and avoid penalties. Proper record-keeping and knowledge of relevant deductions can help reduce overall tax liability, ultimately leading to potential savings.