How to Add Tax and Discount to an Invoice
Discount first, then tax — with a worked example
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How to do it — step by step
Add your items and check the subtotal
Fill in your items — description, quantity and rate. The subtotal is the sum of quantity times rate for every line. Everything else — discount and tax — is calculated from this subtotal, so check it first.
Enter the discount percentage
In the “Tax & discount” box, type the discount you agreed with your client, for example 5. The discount comes off the subtotal first: a 5% discount on a $160.00 subtotal is $8.00, leaving $152.00. The discount is always a percentage of the subtotal, never of the total after tax.
Enter the tax percentage
Type the tax percentage in the tax box, for example 10. Tax is calculated on the discounted amount — not on the original subtotal. On a discounted amount of $152.00, 10% tax is $15.20.
Check the grand total
The grand total is the discounted subtotal plus the tax: $152.00 + $15.20 = $167.20. The preview shows every line — subtotal, discount, tax and total — so you can check the figures before you send the invoice.
Download and double-check before sending
Press “Download PDF”, choose “Save as PDF”, and read the invoice once more. Check the subtotal, the discount amount, the tax amount and the grand total. If a figure looks wrong, change the percentage in the form — the preview updates live.
About how to add tax and discount to an invoice
The order matters: discount first, then tax. That is how the Invoice Generator works, and it is how invoices are normally calculated. The reason is simple: tax is charged on the amount the customer actually pays. If you give a discount, the customer pays less, so the tax is charged on the smaller amount. Work it the other way round — tax on the full price, then discount the total — and you charge tax on money the customer never paid. On a $160.00 invoice with a 5% discount and 10% tax, the difference is real: discount first gives a total of $167.20, while taxing first and discounting after gives $167.60. It is only 40 cents here, but on a $16,000 invoice it is $40 — and a client who checks the figures will notice.
Here is the worked example, step by step. Two items: website design, 4 hours at $30 an hour, which is $120.00; and logo design, 1 item at $40, which is $40.00. The subtotal is $120.00 + $40.00 = $160.00. The discount is 5% of the subtotal: 5% of $160.00 is $8.00, so the discounted subtotal is $160.00 − $8.00 = $152.00. The tax is 10% of the discounted subtotal: 10% of $152.00 is $15.20. The grand total is $152.00 + $15.20 = $167.20. That is exactly what the Invoice Generator shows when you enter 5 in the discount box and 10 in the tax box with these items — subtotal $160.00, discount −$8.00, tax $15.20, total $167.20.
The most common mistakes are easy to avoid once you know them. The first is adding tax before the discount, which overcharges the client, as shown above. The second is taking the discount off the total including tax — a 5% discount on $176.00 (subtotal plus tax) is $8.80, not $8.00, and it leaves the tax wrong as well. The third is forgetting that a discount and a tax are percentages of different amounts: the discount is a percentage of the subtotal, and the tax is a percentage of the discounted subtotal. And the fourth is rounding: always check the final total to two decimal places, because a few cents of rounding on each line can add up. The generator does the arithmetic for you, but reading the preview before you send the invoice takes ten seconds and catches every one of these mistakes.
If you do not need tax or a discount, leave both boxes at 0 and the invoice simply shows the subtotal as the total. If you charge tax in one country and not in another, or you give a discount to one client and not to the next, just change the percentages per invoice — the fields are yours to set each time. And remember that the percentages are your decision: the tool calculates the figures, but it does not know your local tax rate or whether you are registered for tax. Check your local rules before you charge tax, because the generator is a calculator, not tax advice.
Try it now
Try it now — the free Invoice Generator calculates tax and discount for you — free, no sign-up, and your data never leaves your browser.
Frequently asked questions
Does the discount come off before tax?
Yes. The discount is taken off the subtotal first, then tax is calculated on the discounted amount. That is how the Invoice Generator works, and it is the normal way invoices are calculated.
What is the worked example on this page?
Subtotal $160.00, 5% discount is $8.00, leaving $152.00. Tax of 10% on $152.00 is $15.20. Grand total $167.20. Enter 5 in the discount box and 10 in the tax box to see exactly these figures.
Can I use 0% tax or 0% discount?
Yes. Leave either box at 0 and that line is skipped. With both at 0, the grand total is simply the subtotal.
What if I add tax before the discount by mistake?
You would overcharge the client: tax on the full $160.00 is $16.00, and discounting the total after that gives $167.60 instead of $167.20. Always let the discount come first — the generator does this automatically.
Does the generator round the totals?
Yes, totals are shown to two decimal places in the currency you choose, so the figures on the invoice are the figures the client pays.
Is this tax advice?
No. The tool calculates the figures from the percentages you enter. Which tax rate applies to you, and whether you must charge tax at all, depends on your country and your registration — check your local tax rules.
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