Mr Obama said there were elements of the deal that he opposed US President Barack Obama has announced a bipartisan agreement has been reached to extend soon-to-expire Bush era tax cuts to all Americans.
Referring to the bitter wrangling over the issue, Mr Obama said he would not "let working families become collateral damage for political warfare".
Some Democrats have reportedly objected to the deal, saying it is too generous to the wealthy.
Unemployment benefits will also be renewed under the agreement.
The announcement comes two days after the US Senate rejected President Obama's preferred tax plan.
'Grave injustice'
Mr Obama said there were elements of the deal that he opposed - including an extension of tax cuts for the wealthiest 2% of Americans.
But he said striking a deal with Republicans was more important than allowing the tax cuts to expire on 1 January 2011 amid a political stalemate.
He said it would be a "grave injustice to let taxes increase" for ordinary Americans.
"Make no mistake, allowing taxes to go up on all Americans would have raised taxes by $3,000 for a typical American family and that could cost our economy well over a million jobs," he said at the White House.
Other elements of the deal include a cut in Social Security taxes and tax breaks for businesses.
News of the agreement comes a week after the government reported that joblessness in the US had risen in November to 9.8%.
With the agreement on tax cuts finalised, analysts say Congress may now focus its attention on holding a debate over whether to ratify the New Start Treaty, which seeks to reduce the nuclear arsenals of both the US and Russia and allow each to inspect the other's facilities.
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Source: http://www.bbc.co.uk/go/rss/int/news/-/news/world-us-canada-11933043
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