The White House reached a last-minute deal with Republican politicians to prevent sweeping new year tax increases and spending cuts.
Officials said a vote in the US Senate later to ratify the deal to avert the so-called "fiscal cliff" was possible, barring opposition from majority Democrats.
The measure would extend George Bush-era tax cuts for family incomes below 450,000 dollars a year (£278,000) and briefly avert across-the-board spending cuts poised to strike the Pentagon and domestic agencies this week.
Vice President Joe Biden, who stepped in to negotiate the deal with the Senate's top Republican, minority leader Mitch McConnell, arrived at in Washington to brief the Democratic rank and file. Hours earlier, President Barack Obama said of legislation that redeems his campaign pledge to raise taxes on the wealthy while sparing the middle class: "It appears that an agreement to prevent this new year's tax hike is within sight. But it's not done."
Even by the dysfunctional standards of government-by-gridlock, the activity at both ends of historic Pennsylvania Avenue was remarkable as the White House and Congress struggled over laws to prevent a fiscal cliff of more than 500 million dollars in tax increases and about 110 million in spending cuts.
Economists feared that such a double blow to the fragile US economy could lead to a big jump in unemployment and lead to a new recession.
As darkness fell on the last day of the year, Mr Obama, Mr Biden and their aides were at work in the White House, and lights burned in the House of Representatives and Senate. Democrats complained that Mr Obama had given away too much in agreeing to limit tax increases to incomes over 450,000 dollars, far above the 250,000 level he campaigned on. Some Republicans recoiled at the prospect of raising taxes at all.
A late dispute over the estate tax produced allegations of bad faith from all sides.
Mr McConnell - shepherding the final talks with Mr Biden - agreed with Mr Obama that an overall deal was near. In remarks on the Senate floor, he suggested Congress move quickly to pass tax legislation and "continue to work on finding smarter ways to cut spending" next year. The White House and Democrats initially declined the offer, preferring to prevent the cuts from kicking in at the Pentagon and domestic agencies alike. Officials said they might yet reconsider, although there was also talk of a short-term delay in the reductions.
While the deadline to prevent tax increases and spending cuts was technically midnight, passage of legislation by the time a new Congress takes office at noon on January 3 - the likely timetable - would eliminate or minimise any inconvenience for taxpayers.