How to Calculate Discounts and Sale Prices

A 40% off sign grabs attention. But how much will you actually pay? And when a store offers 20% off plus an extra 10% off, is that really 30% off? (Spoiler: it’s not.)

Knowing how to calculate discounts by hand keeps you from overpaying and helps you compare deals across stores. This guide covers single discounts, stacked discounts, after-tax pricing, and common retailer tricks. For quick math, use our Discount Calculator.

The Basic Discount Formula

To find the sale price of a discounted item, you need two numbers: the original price and the discount percentage.

Formula:

$Sale \ Price = Original \ Price \times (1 - Discount \ Rate)$

Steps:

Convert the discount percentage to a decimal (e.g., 25% = 0.25).
Subtract from 1 (e.g., 1 - 0.25 = 0.75).
Multiply by the original price.

Example: A $120 pair of shoes is 25% off. What do you pay?

Discount rate as decimal: 0.25
Multiplier: 1 - 0.25 = 0.75
Sale price: $120 x 0.75 = $90.00

To find the dollar amount saved:

$Savings = Original \ Price \times Discount \ Rate$

$120 x 0.25 = $30.00 saved

How Stacking Discounts Actually Works

Many stores run promotions like “30% off + extra 15% with code SAVE15.” Most shoppers assume that adds up to 45% off. It doesn’t.

Stacked discounts are applied sequentially, not added together.

Formula for two stacked discounts:

$Final \ Price = Original \times (1 - D_1) \times (1 - D_2)$

Example: A $200 jacket is 30% off, and you have an extra 15% off coupon.

After first discount: $200 x 0.70 = $140
After second discount: $140 x 0.85 = $119.00

Total effective discount: ($200 - $119) / $200 = 40.5%, not 45%.

Why Stacking Falls Short

The second discount applies to the already-reduced price, not the original. Each subsequent discount has a smaller dollar base to work with.

Here is a reference table showing what stacked discounts really equal:

Discount 1	Discount 2	Advertised Total	Actual Total
10%	10%	20%	19.0%
20%	10%	30%	28.0%
20%	20%	40%	36.0%
30%	15%	45%	40.5%
30%	20%	50%	44.0%
40%	20%	60%	52.0%
50%	25%	75%	62.5%

Key insight: The gap between advertised and actual savings grows as the discounts get larger.

Does the Order Matter?

Mathematically, no. Applying 30% first then 15% gives the same result as 15% first then 30%. Multiplication is commutative: 0.70 x 0.85 = 0.85 x 0.70 = 0.595.

However, some store systems apply employee discounts or coupons in a fixed order, and certain exclusions may apply to already-reduced items. Read the fine print.

Calculating Tax on Discounted Items

Sales tax is calculated on the discounted price, not the original sticker price (in all US states). This is good news.

Formula:

$Total = Sale \ Price \times (1 + Tax \ Rate)$

Example: A $200 item at 30% off in a state with 8% sales tax.

Sale price: $200 x 0.70 = $140
Tax: $140 x 0.08 = $11.20
Total: $140 + $11.20 = $151.20

Compare that to paying full price with tax: $200 x 1.08 = $216. You saved $64.80, not just $60.

For precise tax calculations, use our Sales Tax Calculator alongside the discount math.

Common Retailer Promotions Decoded

”Buy One, Get One 50% Off” (BOGO 50%)

This sounds like a 50% discount but applies to only one of the two items.

Example: Two shirts at $40 each.

First shirt: $40 (full price)
Second shirt: $40 x 0.50 = $20
Total: $60 for two shirts
Effective discount: ($80 - $60) / $80 = 25% off each

”Buy 2, Get 1 Free”

Example: Three items at $30 each.

You pay for 2: $60
Effective per-item price: $60 / 3 = $20
Effective discount: 33.3% off

”$20 Off $100 or More”

This is a flat discount that gets worse the more you spend above the threshold.

Spend $100: $20 off = 20% discount
Spend $150: $20 off = 13.3% discount
Spend $250: $20 off = 8% discount

Strategy: Spend as close to the minimum threshold as possible to maximize your effective discount rate.

”Up to 70% Off”

The phrase “up to” means the maximum discount on any item in the sale. Most items will be 20-40% off. Only a handful of clearance pieces hit 70%. Ignore the headline number and calculate each item individually.

Comparison Shopping: Beyond the Percentage

A bigger discount doesn’t always mean a better deal. Compare the final unit price across options.

Example: You need laundry detergent.

Store A: 100 oz bottle, regularly $14.99, on sale for 30% off = $10.49 ($0.105/oz)
Store B: 150 oz bottle, regularly $18.99, on sale for 20% off = $15.19 ($0.101/oz)

Store B has a smaller discount but a lower per-ounce price. It’s the better deal if you’ll use the extra quantity.

Always calculate per-unit cost:

$Unit \ Price = \frac{Final \ Price}{Quantity}$

The “Anchoring” Effect

Retailers set high original prices to make discounts look dramatic. A jacket “originally $300, now $129” feels like a steal. But if the jacket was only ever sold at $300 for one week before being “marked down,” the real value is closer to $129.

How to spot inflated anchors:

Check the price history on comparison sites
Look at similar items from competing brands
Ask yourself: “Would I pay this sale price without seeing the original?”

How to Calculate Reverse Discounts

Sometimes you know the sale price and want to find the original price or the discount percentage.

Find the original price:

$Original = \frac{Sale \ Price}{1 - Discount \ Rate}$

Example: You paid $67.50 after a 25% discount. What was the original price?

$67.50 / (1 - 0.25) = $67.50 / 0.75 = $90.00

Find the discount percentage:

$Discount \ \% = \frac{Original - Sale}{Original} \times 100$

Example: An item dropped from $85 to $59.50.

($85 - $59.50) / $85 x 100 = $25.50 / $85 x 100 = 30% off

Skip the Mental Math

Our Discount Calculator handles single discounts, stacked discounts, and tax calculations instantly. Pair it with the Percentage Calculator for unit-price comparisons or the Sales Tax Calculator for after-tax totals in your state.

Frequently Asked Questions

Is it better to take a dollar-off coupon or a percent-off coupon?

It depends on the purchase total. A $15-off coupon beats 10% off on anything under $150, but 10% off wins on purchases above $150. Calculate the dollar value of the percentage discount and compare: if 10% of your cart total exceeds the flat dollar amount, use the percentage coupon.

Do stacked discounts apply to the original price or the reduced price?

Each discount applies to the price after the previous discount. A 20% off coupon on a 30%-off item takes 20% off the 70% you’re already paying, not 20% off the original price. That’s why 30% + 20% = 44% actual savings, not 50%.

How do I figure out if a “bulk deal” is worth it?

Divide the total price by the number of units to get the per-unit cost, then compare to the single-item price. A 10-pack of batteries for $12.99 ($1.30 each) beats individual batteries at $1.79 each. But only if you’ll actually use all 10 before they expire. Factor in storage, shelf life, and whether you have a genuine need for that quantity.

What is a “loss leader” and should I take advantage of it?

A loss leader is a product sold below cost to attract you into the store. Grocery stores frequently sell milk, eggs, or bananas at a loss hoping you’ll buy other full-price items. If you have the discipline to buy only the discounted item, loss leaders are excellent deals. The trap is filling your cart with impulse purchases that wipe out your savings.