The Overview

If you received a grant or rebate to harden your home against wildfires, you won't have to count that money as taxable income for a few more years. California's Senate Bill 195, which extends and expands the state's wildfire mitigation tax exclusion, was signed by Gov. Gavin Newsom (D) on Sept. 18, 2026. Research has found that combining home hardening with defensible space could double the number of structures that survive a wildfire, according to UC Berkeley News. ​

What the Law Does

The law extends the income-tax exclusion for wildfire loss mitigation payments by two years, moving the expiration from Jan. 1, 2029 to Jan. 1, 2031. That means homeowners who receive grants or rebates for fire-safety work have more time to benefit from the exclusion without worrying about a tax bill on the money they receive.

The law also broadens who qualifies: the definition of a "California qualified wildfire loss mitigation payment" now covers grants, rebates, direct assistance, and other financial help for home hardening, structure hardening, vegetation management, defensible space, fuel modification, and community wildfire resilience. Previously, only payments through the California Wildfire Mitigation Financial Assistance Program qualified for the exclusion.

The law adds funds from the wildfire mitigation grant program created under Proposition 4, the Safe Drinking Water, Wildfire Prevention, Drought Preparedness, and Clean Air Bond Act of 2024, which voters approved in November 2024 and which made $135 million available for wildfire mitigation grants. That expansion means residents tapping those newer Proposition 4 dollars are now covered by the same tax protection as those who used the older program.

The law also requires the Office of Emergency Services to submit a report to the Legislature by Dec. 1, 2031, detailing the total funds distributed from the wildfire mitigation grant program and the number of recipients who may be eligible for the tax exclusion. It appropriates $10,000 from the General Fund to the Office of Emergency Services to cover those reporting costs.

Legislative Status

The Committee on Budget and Fiscal Review was the lead sponsor of the bill, which originated in the Senate. The Senate passed it 28-10 on March 20, 2025. The Assembly passed it unanimously, 79-0, on Aug. 31, 2026, a much wider margin than the Senate's original vote. The Senate then concurred in the Assembly's amendments 40-0 the same day.

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