How to Show a Discount on an Invoice
A discount is only worth giving if the client notices it. Quietly lowering your rate saves them money but hides the gesture, while showing the full price and the discount on separate lines makes the value visible and keeps your standard price on record for next time.
This guide covers the kinds of discount you can offer, where each one goes on the invoice, how tax is calculated around it, and when a credit note is the right tool instead.
Percentage or fixed amount
A percentage discount scales with the order: 10% off a $2,400 job is $240. A fixed discount is a set amount, such as $100 off for a referral, whatever the size of the order.
Percentages suit volume and loyalty discounts; fixed amounts suit promotions and goodwill gestures. Either way, say what the discount is for — "10% repeat-client discount" reads better than an unexplained number.
Line-item or whole-invoice discounts
Discount a single line when the reduction applies to one item, such as a bulk rate on 50 units or a service you're including at a reduced price. Show the normal price and the discount on that line, or add a discount line directly beneath it.
Discount the whole invoice when the reduction is about the relationship rather than any one item, like a loyalty or referral discount. It goes after the subtotal, as its own line, before any tax.
Calculate tax after the discount
In most systems, VAT, GST, or sales tax is charged on the discounted price — what the client actually pays — not on the price before the discount. The order is subtotal, then discount, then tax on the reduced amount, then the total.
For example: a $2,400 subtotal less a 10% discount of $240 leaves $2,160 to tax; tax at 8% on that is $172.80, for a total due of $2,332.80. If the invoice mixes tax rates, or taxable and exempt items, a whole-invoice discount is usually spread across them in proportion to their value, so each is taxed on its own discounted amount. Discounts that depend on something happening later, such as paying early, can be treated differently in some tax systems, so check your local rules before offering them.
Early-payment discounts
An early-payment discount rewards speed rather than volume — 2% off if the invoice is paid within 10 days, for example. Because it depends on when the client pays, it belongs in the payment terms rather than as a line deducted from the total up front. Show the full amount as the total due, and state the offer beside your terms with a date, such as "2% discount if paid by 11 October".
When to use a credit note instead
A discount goes on the invoice before it's issued. If you decide to reduce the price after an invoice has gone out — to settle a complaint, or because you forgot an agreed discount — don't edit or reissue it; issue a credit note for the reduction instead.