The United States House of Representatives has approved a bill to avert the so-called "fiscal cliff." President Barack Obama is expected to sign the bill into law shortly.
The bill passed shortly before 11pm (0400 GMT) Tuesday night in Washington DC with a 257-167 vote.
Holding a press conference shortly after the vote, President Obama urged a "little less drama" in budget deals to follow.
"The one thing that I think hopefully in the New Year we'll focus on is seeing if we can put a package like this together with a little bit less drama, a little bit less brinksmanship, not scare the heck out of folks quite as much," he said.
Obama also warned he would not bargain with House Republicans or offer spending cuts in return for lifting the government's debt ceiling, in the coming months.
"We can't not pay bills that we've already incurred. If Congress refuses to give the United States government the ability to pay these bills on time, the consequences for the entire global economy would be catastrophic, far worse than the impact of a fiscal cliff."
Ahead of the vote, House Republicans dropped their demands to amend the Senate-passed deal with additional spending cuts. The move would have torpedoed the deal.
Technically, the US went over the so-called fiscal cliff in the first minutes of the New Year. However, with financial markets closed on New Year's Day, Congress gained one day to finish the deal before Wall Street re-opens.
Less than two hours after the US had officially reached its borrowing limit of $16.4 trillion on January 1st, US senators voted 89-8 in favor of legislation that would avert a series of dreaded tax increases and spending cuts that many feared could send the US into another recession.
The newly approved deal will raise taxes on wages and investment earnings from 35 percent to 39.6 percent on Americans earning over $400,000 (340,960 euros) a year. The increase would affect couples earning over $450,000.
The bill also includes $12 billion in spending cuts along with $620 billion in tax increases on top earners.
hc/ccp (Reuters, AFP)