Application of biochar amendments in agricultural systems has received much attention in recent years. In this study, we assess the 5‐year impacts of biochar application on soil water and plant interactions for an irrigated fresh market tomato (Solanum lycopersicum) and a rainfed pasture (Poaceae) cropping system. In particular, we focus on three varieties of locally produced biochar from agricultural waste materials—almond shell, walnut shell, and almond pruning residues that are pyrolyzed using a mobile pyrolysis unit. We used the soil hydrological model HYDRUS‐1D to explicitly track seasonal and annual soil water fluxes through changes in water retention, drainage, evaporation, and plant water uptake under biochar application. Modeling results show that the application of biochar at 5% increased soil water availability within the top 20 cm for a rainfed system, irrespective of biochar amendment type. This is clearly indicative of higher plant water uptake and greater water use efficiency (WUE) under biochar application. In contrast, a similar biochar amendment for the irrigated system did not affect WUE, instead reducing seasonal soil evaporation loss and thereby reducing irrigation demand. In both cropping systems, year‐to‐year variability in precipitation significantly impacted the total amount of water saved under biochar application with certain amendments retaining more water than others. Given that biochar application increased water retention irrespective of cropping systems, we further used a simple approach to determine yield trade‐off, if any, between control and biochar treatments. Our economic balance clearly demonstrates that the water saved by amending soil with biochar does not offset the yield disparity if compensated with carbon credits and therefore, application of biochar should be actively considered for both its direct and indirect benefits to potential greenhouse gas mitigation (e.g., diverting orchard waste from open burning), water savings, and soil health.