That is an excellent question and very timely. The tax incentive qualifications have changed significantly over the years, and will likely continue to adjust to market demands and new policies. Case in point, the economic stimulus package, H.R. 1: Div. B, Sec. 1121 (The American Recovery and Reinvestment Act of 2009), which was recently accepted by Congress and signed by President Obama, included a few significant changes to the standards for windows, doors and skylights that qualify for federal tax credits.
Exterior window and door assemblies are tested for their performance characteristics and carry a National Fenestration Rating Council (NFRC) label that displays their measured U-value (insulating) and their SHGC (solar heat gain coefficient) value. The U-value indicates how conductive the windows are to thermal energy transfer. It is the inverse of R-value, which indicates resistance to thermal energy transfer, usually used in reference to house insulation. Thus, while a higher R-value is better for insulation, a lower U-value is better for windows. SHGC refers to the ability of a window to resist radiant heat (heat from sunlight).
To qualify for the federal tax incentives, you will need to find windows with a U-value of .30 or less, and a SHGC value of .30 or less. Not all ENERGY STAR?-rated windows will meet these requirements, so you?ll need to be careful when selecting your windows. This appears to be an oversight that was probably caused by the speed at which the recovery package was put together. The issue lies in the fact that a low SHGC is desired for warmer southern climates, but if you live in a northern or mostly-heating climate, you might want a high SHGC in south-facing windows in order to adsorb as much winter sun as possible. This is a good passive solar strategy and ENERGY STAR recognizes it in its labeling standards. Hopefully, this error will be fixed in an amendment soon.
If you meet the qualification standards, the federal government will provide a tax credit for 30% of the cost of the windows, up to a maximum of $1,500. While the qualifications are a little more stringent than they were a few months ago, the reward is much greater. This is a huge incentive to replace old, single-pane windows that may be made even greater by state, local or utility incentives. You can search for federal, state and local incentives through ENERGY STAR or the Database of State Incentives for Renewables & Efficiency. When speaking to your local window supplier, let them know you plan to take advantage of the tax incentives. Chances are they will know exactly what you need in order to qualify for the federal and local incentives. The smart window dealers and installers have already been talking about the new federal incentives in their marketing materials. Good luck with your project!