2026-09-04
Could New Solar Raise Your California Property Taxes After 2026?
By Uday Singh
CEO, EL-FI Homes | M.S. in Alternative Energy Science, Arizona State University | Executive MBA, UCLA Anderson School of Management
Published September 2026 | Last reviewed against official sources: September 4, 2026
How California's Solar Property-Tax Protection Works Today
California's solar property-tax incentive is technically a new-construction exclusion, not a separate property-tax exemption.
Normally, when something valuable is physically added to real property, the county assessor may determine the market value added by that new construction and add it to the property's existing assessed value.
Qualifying active solar energy systems currently receive different treatment. The solar improvement is generally excluded from assessment as new construction, so installing the qualifying system does not increase the assessment of the existing property solely because of that installation.
California's State Board of Equalization currently states that this exclusion is scheduled to sunset on January 1, 2027.
Does an Existing Solar System Suddenly Become Taxable in 2027?
Generally, no.
Under current California guidance, an active solar energy system that qualified for the exclusion before January 1, 2027 generally continues to be excluded after that date until there is a subsequent change in ownership or other applicable reassessment event.
What About a Solar Project Started in 2026?
This is where project timing becomes particularly important.
California State Board of Equalization guidance provides an example of an active solar energy system that begins construction in February 2026 and is completed in October 2026. Upon completion, the assessor establishes a base-year value for the completed system, but that value is excluded from assessment under the current law.
By contrast, the BOE also provides an example where construction begins in 2026 but is not completed until February 2027. Under the current statute, the portion completed after the January 1, 2027 sunset does not receive the exclusion.
For projects completed in phases, phases that qualify and are completed before January 1, 2027 generally remain excluded, while additional phases completed after that date may be assessable.
What Did AB 2389 Propose?
Assembly Bill 2389 was introduced during California's 2025–2026 legislative session to extend part of the active-solar new-construction exclusion.
Under the April 29, 2026 amended version, the bill proposed extending the exclusion for specified lien dates beginning on or after January 1, 2027 and before January 1, 2031 for certain customer-sited active solar energy systems with a system size of 10 kW or less.
The bill defines "customer sited" as a system installed on the customer's property for the purpose of managing that customer's own electrical needs.
Most importantly for system design, the bill defines system size using solar nameplate capacity measured in alternating current (AC).
Current Status of AB 2389
AB 2389 has not become law.
According to California Legislative Information, the bill passed the Assembly Revenue and Taxation Committee 7–0, was referred to Assembly Appropriations, and was subsequently held under submission on May 14, 2026.
The official legislative website currently classifies the measure as an Active Bill – In Committee Process.
Homeowners should therefore not assume that AB 2389's proposed extension or 10 kW AC threshold will become California law.
Why 10 kW AC Is Different From 10 kW DC
This distinction is easy to miss.
Most residential solar proposals prominently display the total wattage of the solar panels. That figure is generally the system's DC capacity.
AB 2389, however, uses AC nameplate capacity when defining system size.
Therefore:
- DC capacity generally describes the combined nameplate capacity of the solar modules.
- AC capacity relates to the applicable inverter or microinverter nameplate capacity.
A system with more than 10 kW of solar-panel DC capacity is not necessarily the same thing as a system with more than 10 kW of AC nameplate capacity.
Ask Your Solar Contractor to Show Both Numbers
Solar array: _____ kW DC
System / inverter nameplate: _____ kW AC
How Much Could Property Taxes Potentially Increase?
California's constitutional base property-tax rate is generally 1% of assessed value. Actual property-tax bills may be higher because of voter-approved debt rates and other applicable assessments.
If a solar or solar-plus-storage project becomes assessable new construction, the county assessor determines the value added by that construction. The contractor's installation price is not automatically the property's assessed value.
Illustrative Examples
| Illustrative Assessor-Added Value | Approx. 1% Base Tax / Year | Simple 20-Year Amount* |
|---|---|---|
| $25,000 | $250/year | $5,000 |
| $40,000 | $400/year | $8,000 |
| $60,000 | $600/year | $12,000 |
| $80,000 | $800/year | $16,000 |
*Simple illustration only. Assumes unchanged 1% base rate applied to the illustrated added value and does not include voter-approved debt rates, future assessment changes, or other property-specific factors.
Example
$40,000 × 1% = approximately $400/year
Illustrative base property-tax impact only.
Does the Entire House Get Reassessed?
Generally, installing a new improvement does not mean the county automatically resets the assessed value of the entire existing home.
When new construction is assessable, the assessor generally determines the value attributable to that new construction and adds it to the property's existing assessed value.
A separate event—such as a qualifying change in ownership—can create different reassessment consequences.
What About Battery Storage?
California's statutory definition of an active solar energy system used in the production of electricity includes certain storage devices, power-conditioning equipment, transfer equipment, and related parts.
That makes solar-plus-storage projects particularly important to review carefully. However, the treatment of a specific battery installation—especially a battery added later to an existing system—can depend on the facts of the project and the law in effect at the time.
Homeowners considering a battery-only addition or a future expansion should confirm the expected treatment with the appropriate county assessor rather than relying on a general assumption.
Who Could Be Most Affected?
The issue may be especially relevant for Southern California households with growing electrical demand, including homes adding:
- One or more electric vehicles
- Heat-pump HVAC
- Heat-pump water heating
- Pool or spa equipment
- Accessory dwelling units
- Battery storage
- Additional solar panels
- Other electric appliances replacing natural gas
Electrification can increase a home's electricity consumption, which may justify a larger solar system. That is one reason homeowners should understand both DC array capacity and AC system capacity when evaluating a proposal.
Four Questions to Ask Before Signing a Solar Contract
- What are the system's DC array capacity and AC nameplate capacity?
Ask for both numbers in writing. - When is the project realistically expected to be completed?
Consider engineering, permitting, equipment availability, installation, inspection, and other project requirements. - How would my county assessor treat this specific installation?
For projects approaching 2027, obtain property-specific guidance. - Do the projected savings still work if I include a possible property-tax assessment?
A good financial analysis should be able to show both scenarios.
Frequently Asked Questions
Is AB 2389 a new tax on solar?
No. AB 2389 proposed extending an existing property-tax exclusion. The potential cost increase discussed here comes from the scheduled expiration of the current exclusion—not from AB 2389 imposing a new solar tax.
Will every California solar installation be taxed beginning in 2027?
Not necessarily. The scheduled sunset applies to new construction completed on or after January 1, 2027. Qualifying systems already excluded before that date generally continue to benefit from the exclusion. The law does not retroactively remove the exclusion from already-installed qualifying systems.
What is the difference between 10 kW DC and 10 kW AC?
Solar proposals typically describe panel capacity in DC watts. The 10 kW threshold proposed in AB 2389 uses AC nameplate capacity—generally the inverter or microinverter rating. A system described as "10 kW" in a proposal may refer to DC capacity, which may differ from the AC rating. Ask your contractor to provide both figures in writing.
Does adding a battery to an existing system trigger reassessment?
Battery storage can qualify as part of an active solar energy system under California law, but the treatment of a battery added later to an existing system depends on the specific facts and law in effect at the time of installation. Confirm with your county assessor before proceeding.
Where can I get authoritative information on my county's treatment?
Contact your county assessor's office directly. The California State Board of Equalization also publishes guidance on the active solar energy system exclusion at boe.ca.gov.
Disclaimer: This article is provided for general informational and educational purposes only and does not constitute legal, tax, financial, or engineering advice. Property-tax treatment depends on the specific facts of each project and the law in effect at the time of completion. Consult qualified legal, tax, and engineering professionals and your county assessor for advice specific to your situation. EL-FI Homes does not guarantee any particular property-tax outcome. Legislative status is as of September 4, 2026; verify current status at leginfo.legislature.ca.gov.
