diff --git a/commerce_discount.rules.inc b/commerce_discount.rules.inc
index 542c298..dcd42c5 100644
--- a/commerce_discount.rules.inc
+++ b/commerce_discount.rules.inc
@@ -69,8 +69,8 @@ function commerce_discount_rules_condition_info() {
     'base' => 'commerce_discount_date_condition',
   );
 
-  $conditions['commerce_discount_compatibility_check'] = array(
-    'label' => t('Check discount compatibility'),
+  $conditions['commerce_discount_compatibility_check_order'] = array(
+    'label' => t('Check discount compatibility for order'),
     'parameter' => array(
       'commerce_order' => array(
         'type' => 'commerce_order',
@@ -89,6 +89,26 @@ function commerce_discount_rules_condition_info() {
     'group' => t('Commerce Discount'),
   );
 
+  $conditions['commerce_discount_compatibility_check_line_item'] = array(
+    'label' => t('Check discount compatibility for line item'),
+    'parameter' => array(
+      'commerce_line_item' => array(
+        'type' => 'commerce_line_item',
+        'label' => t('Line item'),
+        'description' => t('The line item the discount would be applied to.'),
+        'wrapped' => TRUE,
+      ),
+      'commerce_discount' => array(
+        'type' => 'token',
+        'label' => t('Discount'),
+        'description' => t('A discount with a compatibility strategy that requires evaluation.'),
+        'options list' => 'commerce_discount_entity_list',
+        'wrapped' => TRUE,
+      ),
+    ),
+    'group' => t('Commerce Discount'),
+  );
+
   if (module_exists('commerce_order')) {
     $conditions['commerce_order_compare_order_amount'] = array(
       'label' => t('Order amount comparison'),
@@ -424,7 +444,7 @@ function commerce_discount_rules_event_info() {
 }
 
 /**
- * Rules callback: executes the "Check discount compatibility" condition.
+ * Rules callback: executes the "Check discount compatibility for order" condition.
  *
  * @param EntityDrupalWrapper $order_wrapper
  *   The order the discount would be applied to.
@@ -434,7 +454,7 @@ function commerce_discount_rules_event_info() {
  * @return bool
  *   Returns TRUE if nothing has disqualified compatibility.
  */
-function commerce_discount_compatibility_check(EntityDrupalWrapper $order_wrapper, $discount_name) {
+function commerce_discount_compatibility_check_order(EntityDrupalWrapper $order_wrapper, $discount_name) {
   // Ensure the discount we're loading still exists.
   if (!$discount = entity_load_single('commerce_discount', $discount_name)) {
     return FALSE;
@@ -444,9 +464,46 @@ function commerce_discount_compatibility_check(EntityDrupalWrapper $order_wrappe
   $strategy = commerce_discount_get_compatibility_strategy($discount);
 
   // Determine which discounts have been applied to the order thus far.
+  // First a recalculation must be made to include previously applied discounts
+  $order = $order_wrapper->value();
+  commerce_order_calculate_total($order);
+  // The wrapper has not been updated so we need to do that manually
+  $order_wrapper = entity_metadata_wrapper('commerce_order', $order);
+  // Now we can get the correct order total.
   $order_total = $order_wrapper->commerce_order_total->value();
   $applied_discounts = commerce_discount_get_discounts_applied_to_price($order_total);
 
+  return _commerce_order_get_discount_compatibility($discount, $strategy, $applied_discounts);
+}
+
+/**
+ * Rules callback: executes the "Check discount compatibility for line item" condition.
+ *
+ * @param EntityDrupalWrapper $line_item_wrapper
+ *   The line item the discount would be applied to.
+ * @param string $discount_name
+ *   The discount name whose compatibility needs to be checked.
+ *
+ * @return bool
+ *   Returns TRUE if nothing has disqualified compatibility.
+ */
+function commerce_discount_compatibility_check_line_item(EntityDrupalWrapper $line_item_wrapper, $discount_name) {
+  // Ensure the discount we're loading still exists.
+  if (!$discount = entity_load_single('commerce_discount', $discount_name)) {
+    return FALSE;
+  }
+
+  // Get the strategy from the compatibility strategy field.
+  $strategy = commerce_discount_get_compatibility_strategy($discount);
+
+  // Determine which discounts have been applied to the line item thus far.
+  $unit_price = commerce_price_wrapper_value($line_item_wrapper, 'commerce_unit_price', TRUE);
+  $applied_discounts = commerce_discount_get_discounts_applied_to_price($unit_price);
+
+  return _commerce_order_get_discount_compatibility($discount, $strategy, $applied_discounts);
+}
+
+function _commerce_order_get_discount_compatibility($discount, $strategy, $applied_discounts) {
   // Ensure none of them indicate they are incompatible with the current one.
   foreach ($applied_discounts as $applied_discount_id => $applied_discount_name) {
     // Determine the strategy of the existing discount.
diff --git a/commerce_discount.rules_defaults.inc b/commerce_discount.rules_defaults.inc
index 3d21d7c..5cb05f9 100644
--- a/commerce_discount.rules_defaults.inc
+++ b/commerce_discount.rules_defaults.inc
@@ -50,10 +50,18 @@ function commerce_discount_default_rules_configuration() {
       // discount is compatible with any other discount, we need to prevent it
       // from being added if a previously applied discount indicates it is not
       // compatible with the current one.
-      $rule->condition('commerce_discount_compatibility_check', array(
-        'commerce_order:select' => $type['entity type'] == 'commerce_order' ? 'commerce-order' : 'commerce-line-item:order',
-        'commerce_discount' => $discount->name,
-      ));
+      if($discount->type === 'order_discount') {
+        $rule->condition('commerce_discount_compatibility_check_order', array(
+          'commerce_order:select' => $type['entity type'] == 'commerce_order' ? 'commerce-order' : 'commerce-line-item:order',
+          'commerce_discount' => $discount->name,
+        ));
+      }
+      elseif($discount->type === 'product_discount') {
+        $rule->condition('commerce_discount_compatibility_check_line_item', array(
+          'commerce_line_item:select' => 'commerce-line-item',
+          'commerce_discount' => $discount->name,
+        ));
+      }
 
       // Let other modules alter the rule object, with configuration specific
       // to commerce discount. We don't invoke an alter function, as it can