Taxpayers can ring in a Happy New Year now that Congress has extended the Bush-era tax cuts. The Senate passed a bill extending the tax cuts on an 81-19 vote on Wednesday, and  the House passed the bill late Thursday night on vote of 277 to 148. President Obama is expected to sign the bill on Friday.

"I know that not every member of Congress likes every piece of this bill, and it includes some provisions that I oppose," President Obama said. "But as a whole, this package will grow our economy, create jobs, and help middle class families across the country.  As this bill moves to the House of Representatives, I hope that members from both parties can come together in a spirit of common purpose to protect American families and our economy as a whole by passing this essential economic package."

The bill, which came out of an agreement between the president and Republicans, extends the Bush-era tax cuts for another two years. The tax cuts, which were set to expire on Dec. 31, have been a point of contention and political wrangling for months. Originally, the President Obama and the Democrats wanted to extend the tax cuts only for families making less than $250,000 a year. The Republicans wanted them extended for all Americans, saying not extending the cuts could hurt the fragile economic recovery.

The legislation, which will cost $858 billion over 10 years, according to the Congressional Budget Office, extends income tax cuts for two years, creates a one-year, 2 percentage-point cut in payroll taxes and continues jobless benefits for the long-term unemployed for 13 more months.

In addition to extending the Bush-era tax cuts, the compromise legislation between the president and the Republicans contains a number of other provisions, including:

• Extends the current level of unemployment benefits for an additional 13 months
• Reduces the payroll tax rate for employees from 6.2 percent to 4.2 percent for one year
• Temporarily allows businesses to expense all of their investments in 2011
• Extends the R&D tax credit and other tax credits for two years
• Caps the estate tax at 35 percent, with a $5 million individual exemption
• Created a stop-gap to prevent a significant expansion of the Alternative Minimum Tax (AMT) that could have affected up to 25 million taxpayers on their 2010 income tax

 

Click here for a related story on the Obama/Republican agreement.