What to Know About California’s Solar Property Tax Exclusion

Time is officially running out for California homeowners to take advantage of one of the state's most valuable financial protections. For years, adding solar panels meant securing energy independence without increasing your property taxes.

Under current law, the value of a qualifying solar system is completely excluded from your home's assessed value. However, this critical shield is scheduled to disappear on January 1, 2027. If you are considering going solar, the window to protect your home from a permanent tax hike is closing fast.

How Does the California Solar Tax Exclusion Work?

Typically, when new construction adds value to a California property, the county assessor increases the property's taxable value. For example, if your home is assessed at $500,000 and you build a room addition that adds $30,000 in value, you will now be taxed on a $530,000 home.

Currently, qualifying active solar energy systems receive a "new construction exclusion" under California Revenue and Taxation Code Section 73.

• Assessors are instructed to ignore the value added by qualifying solar systems, preventing the installation from triggering a taxable value increase.
• This is not a full property tax exemption, meaning homeowners still pay standard property taxes on the home itself.

Do Solar Panels Increase Property Taxes After 2026?

If the current exclusion expires, solar systems installed on or after January 1, 2027 will increase your property's assessed value. The entire home will not be reassessed, but the taxable value of the new solar system will be added to the assessment.

• If an assessor values the new system at $30,000, with a standard 1.15% tax rate, property taxes would increase by roughly $345 per year.
• A $40,000 assessment would add approximately $460 annually.

Does Solar Have to Be Installed Before the Deadline?

Yes. For homeowners starting a solar project in 2026, completion is what matters. Merely signing a contract or having the equipment placed on your roof before December 31 is not enough to qualify.

• The State Board of Equalization clarified that solar construction generally will not qualify just because it started before the deadline.
• The completed system must be fully completed (including PTO) before January 1, 2027, to receive the exclusion.

Installing solar can take anywhere from 2 weeks to 3 months depending on your jurisdiction. Ensure you leave yourself with ample time to get your system fully completed.

Will California Extend the Solar Tax Exclusion?

Historically, California has extended this tax benefit multiple times to encourage clean energy adoption. The original active solar energy system exclusion under Section 73 was initially set to sunset in 1985. Since then, it has been repeatedly renewed, most recently in 2022 when lawmakers pushed the deadline from 2024 to the end of 2026.

However, homeowners should not assume another extension is guaranteed. California lawmakers have proposed a new extension through Assembly Bill 2389, which would continue the exclusion for certain customer-sited systems with a capacity of 10 kilowatts or less. As of August 20th, 2026, AB 2389 has not passed the Legislature. It was held under submission in the Assembly Appropriations Committee on May 14, 2026, meaning it is effectively stalled. Until an extension is officially enacted, homeowners must plan around the law that exists today.

Plan Your 2026 Solar Installation Before Time Runs Out

While the scheduled expiration does not make solar suddenly unaffordable, missing the deadline could create a frustrating and ongoing property tax cost for homeowners who wait.

For over 10 years, OC Solar has been Southern California’s trusted authority in residential solar. As a top-ranked local contractor with leadership recognized by the Orange County Business Journal, we have the proven expertise to design the right system for your home and successfully navigate the installation timeline.