But President Obama originally told voters that taxes on income of more than $250,000 should increase.
On the campaign trail in Reno, Nev. in February 2008, Obama called for a rollback of the Bush tax cuts on the wealthiest Americans. This deal does not do that.
The family of an average Wall Street banker, with a wage of $311,330, will keep $9,318 as opposed to the $8,012 the president wanted them to keep.
The compromise follows days of nonstop negotiations between the White House and congressional leaders and two failed attempts by Democrats over the weekend to extend the tax cuts for everyone except high earners.
On Saturday, after the Senate vote, President Obama met with House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid to tell them he was open to any compromise that included temporary breaks for middle class families and an extension of jobless benefits. Jobless benefits began expiring last week for some two million Americans.
Senate Majority Whip Richard Durbin, D.-Ill., insisted Sunday that a deal with Republicans must include an extension of unemployment benefits. He called it "unconscionable" that benefits might expire before Christmas, and that at the same time tax cuts might be extended to people making more than $1 million.
Meanwhile, Utah Republican Orrin Hatch expressed willingness to accept something less than a permanent extension of the cuts for the wealthy. "We would like it permanent," he said, "but we don't have the votes." He said he could settle for a two- or three-year extension.
Obama met early Monday with his two chief negotiators -- Budget Director Jack Lew and Treasury Secretary Timothy Geithner -- to refine strategy before heading off to Winston-Salem, N.C., to deliver a speech at Forsyth Technical Community college.
"If we're willing to put aside short-term politics, if our objective is not simply winning elections but winning the future then we should be able to get our act together here, because we are all Americans, and we are in this race together," he said.
ABC's Matt Jaffe and Devin Dwyer contributed to this report.