The Senate and House of Representatives both passed the measure by unanimous consent early today, which CNN described as a "procedural move allowing the measure to pass even though most members of Congress are now home for the holidays."
It now goes to President Obama, who is expected to sign the bill.
The tax cut would have expired Dec. 31 without the extension. The votes Friday ended a bitter political battle over the measure that lasted weeks, the Washington Post reported.
The measure affects 160 million American workers, Reuters reported.
The political battle over the measure may have hurt the GOP, CNN stated.
Political analysts believe that the showdown over the payroll tax cut has eroded GOP strength on the party's core issue of lower taxes. While GOP leaders first questioned the merit of the tax holiday and then complained that a short-term extension would be more trouble than it's worth, Obama used the standoff to portray the Republicans as defenders of the rich with a callous attitude toward the burdens of the middle class.
Obama pushed the House to get on board until an agreement was made.
"This is an issue where an overwhelming number of people in both parties agree. How can we not get that done?" Obama said at the White House Thursday. "Has this place become so dysfunctional that even when people agree to things we can't do it?"
A House-Senate committee will continue negotiating a yearlong extension.