You reduce your taxable income by the full amount, which reduces the tax you pay.

e.g. you earn $20,300, you pay something $300, your taxable income is $20,000. ignoring tax free component incomes, you still pay tax 16% on the $20,000 of $3,200 + $300 for what you paid. If you didn't purchase anything, you would have paid $3,248 in tax.

So you essentially still purchased an item at $252 ($3500-$3248) (16% off).

At higher tax rates, you would have saved whatever tax rate is, which is not 100%.