Income Level Requirements

In order to apply for subsidized daycare, your family income must be at or below the Federal Poverty Income Guidelines (FPIG). The guidelines for what constitutes a “low-income” family vary by state which can affect both household income and the number of dependents present in your family unit. The definition of a “low-income family” changes each year in order to reflect employment and economic conditions as well as total program funding available for all the states. To determine whether or not your family qualifies for assistance, you must calculate your total monthly or annual gross income from all sources. Once total income has been determined, you can consult the appropriate social services agency for your state to see if your family is eligible.

Scope of Coverage

Some states will only offer funding to parents that are either working, enrolled in school, or taking vocational training. Other states offer temporary subsidies to lower daycare costs for parents that are on medical or maternity leave, unemployed, or looking for work. It is important to remember that the assistance being given by the state is temporary and only meant to relieve parents from financial strain during some sort of transitional period. In most cases, documentation is required to prove that one or both parents meet all of the requirements for funding. In-person and/or phone interviews may also be required depending on where you live. For most states the maximum length of coverage for low-income daycare assistance is 6 or 12 months. The duration of funding for medical leave or unemployment is usually 1 to 3 months.

Subsidized Daycare Payment Methods

Daycare costs are rarely paid entirely by the government. All states require a co-payment for the duration of funding, though this can be waived under certain circumstances. The co-payment amount is determined by total household income, family size, and (sometimes) number of children receiving care. The following table contains sample data taken from a September 2010 publication by the Minnesota Department of Human Services:

Keep in mind that the definition of a household or family unit varies by state, so this needs to be considered when calculating gross household income. In addition to salaries and wages, this figure can include income such as investment, disability, unemployment insurance and other forms of regular income. In calculating household size, some states make a distinction between dependents and income-earners while other states do not. In the previous example for the state of Michigan, a household of five could consist of four income-earning adults and one dependent under the age of 13. Or it could consist of one working parent with five school-aged dependents. Unfortunately, the income allowance and associated co-payment requirements would be the same in both cases.

Daycare Assistance for Young Children

Daycare assistance is only available for parents with children under the age of 13. Assistance is also available for children with special needs that are under the age of 19. Community development programs for young children and toddlers are accessible in many areas. Most notable of these programs is the Early Head Start program for low-income mothers with young children. The aim of this federally-funded program is to “increase the school readiness of young children from low-income families”. It is available for children ages 3 to 5 in a variety of locations. You can find a location nearest to you by clicking on the program link. There are also state-funded preschool programs available for toddlers that aim to prepare them for kindergarten.


For those living below the poverty line, subsidized daycare costs can truly be a lifeline to starting a new career and avoiding destitution. Even if your family doesn’t qualify for daycare assistance, you may still be eligible for private scholarships and tax credits under the Earned Income Tax Credit designed to assist low-income families. For specific application requirements for your state, you can start you search at the National Child Care Information and Technical Assistance Center’s (NCCIC) website located here.

Step 1: Application Information

Contact the licensing agency and determine which child care license you should apply for. In some states there will be only two classifications: center-based and family-based. Others will have further classifications largely dependent on the number of children that will be cared for at any given time. Each license has its own rules, procedures and fees. The National Child Care Information Center has an excellent online directory of licensing departments for each state. Most of the licensing agencies have telephone and email contact information along with application packages that can be ordered or downloaded directly. There are also help pages or frequently asked questions to give you a good understanding of the application procedure. If the answers are not available on the website itself, it would be best to find a contact for your jurisdiction that can give you timely, accurate answers to your questions.

Step 2: Daycare Requirements

The complete daycare licensing process will generally fall into just a few categories: orientation, background checks, medical training, facility preparedness, submission of the application and inspection. In many cases, you will be required to provide criminal background checks and proof of applicable health and childcare training before you can start the application process. You many also be required to attend a seminar given by the regulating body. The purpose of the seminar is to give you more information about the application process, answer questions you may have, and get you started on determining which license to apply for and whether or not your child care center may be exempt from the application procedure. Before undertaking the grueling process of filling out forms, it’s best to find out the order in which the tasks need to be completed along with the amount of time needed for completion. For instance, criminal background checks for yourself and your staff can be quite lengthy, so they should be completed early on in this process.

Step 3: Taking care of business (TCOB)

Once you have identified all of the staff and daycare requirements, it’s time to plan how you are going to meet those requirements. Starting the background checks and enrolling in all the necessary courses early on, will give you time to renovate and child-proof the house later on. Fire regulations and Food Code ordinances are quite meticulous. Likewise, the policies regulating the space and equipment required for playing, sleeping, and eating are equally explicit. Following state guidelines issued through the licensing agency and other governing bodies should help you prepare for the final inspection. However, it may be wise to anticipate delays and last-minute changes throughout the daycare licensing process.

In addition to the above three steps, be sure to document and file all relevant information collected throughout the process. It’s easy to get lost in paperwork and lose track of an invoice or receipt. Keeping a time-ordered checklist and some type of filing system for your documents will help prevent this from happening. A file containing detailed contact information, First Aid training, background checks, references, and educational background should be kept on hand for each employee of the daycare. Demonstrating how and when you have satisfied all of the application criteria can go along way to ensuring your child care center receives accreditation. Lost forms and missing information can lead to lengthy delays and inconvenient rescheduling. The daycare licensing process is in place to ensure the safety and well-being of the children you will care for. Not only will the license assure that you are following all laws and regulations, it will afford parents necessary added piece of mind accreditation provides them.

Legal requirements to open a daycare

Some states differentiate between ‘babysitting’ and operating a daycare. Generally, the number of children being cared for dictates which category your business is placed in. There are more stringent requirements for daycares than for babysitting businesses. Specific laws and regulations differ state-to-state but the general requirements are:

These are broad requirements and it is up to you to ensure that you are familiar with the legal requirements imposed by your state. You will need to address these requirements in detail when writing your business plan.

Daycare business plan

Whether or not you require outside funding to start your daycare business, it is beneficial to develop a detailed business plan. It should contain your operational, financial and marketing planning at a bare minimum. Writing a comprehensive business plan forces you to do all of the required research and planning necessary to run your business smoothly and profitably. You will need to estimate start-up and operational costs as well as your expected income. In writing the business plan you will likely ask yourself a number of questions. What is required to bring your house up to the minimum building regulations? How many staff members will you need to hire? What is your break-even point? How will you promote your business? How much are other daycares in your area charging per child?

As you answer these questions, you will find that new ones continue to present themselves. If you are not a business-savvy individual, there are a few well-researched daycare start-up kits that include all the daycare forms, licensing requirements and step-by-step guides that address all of your questions.

Daycare forms for start-up and daily operation

When first opening your doors as a new daycare business, it is best to have several forms already prepared. Some of these daycare forms are required for you to manage your business, others are required to ease apprehensive parents.

Other forms that will help your business run more smoothly:

Final Thoughts

While this may be one of the least enjoyable aspects of running your own business, ensuring that you have completed all the necessary daycare forms and are in full compliance with state laws and regulations is essential for starting a home daycare. Investing the appropriate amount of time in planning before you open your doors will save you from legal hassles, operational missteps, and financial disaster in the future.

Is there growth in the home daycare industry?

Before starting any kind of business, it is necessary to conduct the appropriate market and competitive research. Getting into a saturated or declining market means that you will have an uphill battle on your hands right from the start. According to the National Association of Child Care Resource and Referral Agencies, 65% of all mothers in America with children under five years old are in the workforce. It is also estimated that an approximately equal percentage of children are cared for by someone other than their parents. Applying these findings to your potential serviceable area, you may find that there are dozens or even hundreds of children that could be enrolled in your daycare.

What kind of daycare do I want to open?

Before you start a daycare, it’s useful to know a little about different types of daycares that can be opened from your own home or from an external facility. Most can be grouped into either of two categories: family daycares and group daycares. The family daycare is usually operated by a caregiver who takes care of other children in addition to her own, in order to supplement her income. This daycare is smaller and usually more flexible to the demands of parents. It is often not licensed by the state so parents may not be able to claim daycare expenses on their income tax returns. This type is easy to start up and requires little capital investment.

Group daycares are usually larger and often separate children by age or differing needs. They may be standalone centers or they may be run from large homes with backyards.

A private daycare is a for-profit entity that provides interesting, stimulating activities in a structured environment. They often employ several trained caregivers, and have established policies for hygiene, food preparation, and discipline. They may also provide transportation to and from the daycare. Franchises or chain centers function similarly to private daycares. They are standalone facilities operating from carefully developed operational, marketing, and finance plans. However, they often require that the investor have considerable start-up equity. They will help to train your staff, process all required daycare permits, and assist in creating promotional materials and other forms needed for your business to operate efficiently. They can also assist in designing the layout for the facility and can recommend suitable toys, sleeping mats, and educational materials. If you open a chain center, you will have guidance throughout the start-up and operational periods. However, starting a daycare of this kind requires a significant initial investment and monthly franchise fees may be quite substantial.

In choosing whether you want to open a private daycare or a licensed group daycare, it is best to assess your goals and your means of achieving those goals. Are you a stay-at-home mother looking to merely supplement your income? Do you have caregiver experience or experience educating groups of young children? How many children can you accommodate in your home at one time (eating, sleeping, and playing space)? And then you can ask yourself…

Is this what I really want?

Before you start a daycare business, ask yourself if you are ready for all the unexpected problems that are sure to arise before and during operation. Do you have the means and desire to satisfy the physical, emotional, and intellectual needs of several different children on a daily basis? Each child has his/her own unique personality and needs you must attend to. In addition to care-giving, you will also need to be a manager, an accountant, and a salesperson. If you would like to start a daycare as a full-time business, remember that you may need to hire and train staff, promote your daycare regularly, as well as apply for the appropriate zoning, fire safety, and building code permits.

What resources are available for starting a daycare?

There are several books available that can guide you through the process. Searching on Amazon.com will yield at least a dozen results. There are two highly-rated start-up kits with step-by-step information on how to develop a business plan, get licensed & insured, manage your cash flow and attract clients. There is detailed information on creating all the necessary daycare forms, staffing, establishing policies and procedures. The Daycare Starter Kit and Starting a Daycare Center Start-up Kit are two of the most popular comprehensive start-up guides out there. They are equally great resources, but the latter has a couple of extra bonus items at the time of writing this article.