The 34-year-old Iceland striker has relished the west London club's return to the top flight this term, with seven goals in 12 Premier League appearances.
"I am very pleased to know I will be here for another year," he said. "I am really happy. When you are a bit older, you think more about your contract situation than you might do when you are in your 20s because the contracts tend to be shorter.
"When you have kids and family, you have to plan because your kids are in schools, and things like that. So you need to know where you are going to be.
"I think it helps you on the pitch when you know what's happening. It means I know where I am going to be for the next 18 months, rather than the next six."
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