How discounts are calculated
- Single discount: save = price × percent ÷ 100, and the final price is what is left. 20% off $100 saves $20, charging $80.
- One-step shortcut: final = price × (1 − percent ÷ 100). Twenty percent off is the same as multiplying by 0.8.
- Stacked discounts multiply, they never add. "20% off, then an extra 25% off" is 0.8 × 0.75 = 0.6 — an effective 40% off, not 45%. Retailers count on shoppers assuming otherwise.
If you are the one giving the discount rather than taking it, remember every point comes straight out of profit — model the impact on your profit margin first, then price the promotion into your base markup.
Three worked examples
Example 1 — the stacked "70% off" banner
A store advertises "up to 70% off — extra 20% at checkout". A jacket originally $200 is marked down 50% to $100, then the checkout takes another 20%: $100 × 0.80 = $80. The effective discount is 60%, not 70%. The maths: 0.50 × 0.80 = 0.40 of the original price. Only the best-stocked lines reach the full 70%.
Example 2 — BOGO decoded
"Buy one get one 50% off" on two $40 shirts: pay $40 + $20 = $60 for $80 of goods — an effective 25% off per shirt, not the 50% the banner shouts. "Buy one get one free" is the only BOGO that really means 50% off, and it applies only if you wanted two in the first place.
Example 3 — running a promotion without losing money
You sell a service at $500 with a 45% margin ($225 profit). A "15% off" weekend: price drops to $425, cost stays $275, profit falls to $150 — a 35.3% margin. The 15% discount ate a third of your profit. If you need the promotion to be profit-neutral, you would have to sell roughly 50% more units at the discounted price ($225 ÷ $150 = 1.5×). Check both sides: the discount here, the margin over on the profit margin calculator.
Discounts, "was" prices and the law
In the United States, the FTC's guides on pricing advertising (16 CFR Part 233) treat a "was $200, now $100" claim as deceptive unless the $200 was the regular selling price for a reasonably substantial time. In the UK and EU, the Consumer Protection from Unfair Trading Regulations take a similar view of fake reference prices, and the EU Omnibus directive requires 30-day lowest-price comparisons for "was/now" claims. Two practical rules for a small business: keep the pre-discount price real, and keep records of how long it ran.
Deadlines on promotional invoices follow the same payment-terms mechanics as any other bill — set them with the invoice due date calculator.
FAQ
How do I calculate 20% off a price?
Multiply the price by 0.20 for the discount and subtract it — $100 becomes $80. The one-step version is multiplying by 0.80.
Is 20% off then 20% off the same as 40% off?
No. Discounts stack multiplicatively: 0.8 × 0.8 = 0.64, so you pay 64% — an effective 36% off. This calculator's second-discount field exposes the real combined rate.
How do I find the original price from a sale price?
Divide the sale price by (1 − rate ÷ 100). An $80 tag after 20% off means the original was $80 ÷ 0.80 = $100.
What is the difference between a discount and a markdown?
A discount is a temporary price reduction, usually on demand (coupons, seasonal sales). A markdown is a permanent reduction on slow-moving stock. The arithmetic is identical; the strategy differs.
Does the discount apply before or after tax?
Discounts apply to the pre-tax price in almost every jurisdiction, and tax is then charged on the discounted amount. Take the percent off first, then add sales tax or VAT.
How much margin do I lose on a discounted sale?
All of the discount, plus nothing else — the reduction comes straight out of profit on that unit. A 10% coupon on a product with a 40% margin cuts that margin to about 33%, so promotions cost more than they look.
What does "buy one get one 50% off" really mean?
On two identical items it works out to 25% off the combined price — you pay 1.5× the single price for two units. Enter 25% here to see the same result on any total.
Is a bigger discount always better for the seller?
No — the relationship is harsher than it looks. Because discount comes off the top line while costs stay fixed, each extra point of discount removes proportionally more profit. On a 30%-margin product, going from 10% to 20% off nearly halves the profit. Volume has to rise steeply just to break even on a deep promotion.
What is a trade discount versus a cash discount?
A trade discount comes off the list price for a class of buyer — wholesalers, members, contractors — and is baked into the price before any tax. A cash discount (early-payment discount) rewards paying quickly and is settled after the invoice: "2/10 net 30" means 2% off if the bill is paid within 10 days. Date mechanics for the second kind live on the due date calculator.
Sources and standards
All example figures on this page were computed and verified on September 19, 2026.