Last updated: April 30, 2026. Kentucky child-care regulations verified from 922 KAR 2:090 (effective July 18, 2025) and 922 KAR 2:120 (last amended February 13, 2025); CCAP funding from 2024-2026 biennium budget.

How to Start a Daycare in Kentucky (2026)

Starting a child-care business in Kentucky in 2026 means navigating the July 18, 2025 overhaul of 922 KAR 2:090 (the child-care center licensure regulation), choosing among three regulated tracks (Type I center, Type II family home, certified family child-care home), and making strategic decisions about the Kentucky All STARS quality rating system that drives both reputation and reimbursement. The single biggest 2024-2026 development is the General Assembly’s $112.45 million child-care investment in the 2024-2026 biennium budget — eligibility for the Child Care Assistance Program (CCAP) expanded from 160% of federal poverty level to 85% of State Median Income, child-care center employees can now use CCAP for their own children, and the HB 499 Employee Child Care Assistance Partnership launched as a $15 million pilot that matches employer contributions to employee child-care costs. Kentucky child-care services are exempt from the 6% sales tax under KRS 139.495 — a meaningful planning difference from landscape or janitorial businesses that lost their sales-tax exemption in 2018.

The Kentucky child-care market is concentrated in the same three economic regions as the broader business climate. Louisville Metro and surrounding Jefferson County operate roughly 600 licensed centers and ~250 family homes serving the UPS/Ford/GE Appliances/Yum Brands workforce. Lexington-Fayette and the surrounding bluegrass counties (Scott, Bourbon, Woodford, Madison) form the second center, anchored by Toyota Manufacturing Kentucky’s Georgetown plant and the University of Kentucky. Northern Kentucky (Boone, Kenton, Campbell) is the third — Amazon Air’s CVG hub plus DHL drove rapid growth in family income and a measurable shortage of infant/toddler slots that quality operators have exploited. The market is undersupplied statewide for infant care; mid-sized centers willing to take infants typically have 6-12 month waitlists.

Kentucky Daycare Requirements at a Glance

Requirement	Agency / Regulation	Cost	Timeline
Type I Child-Care Center license	CHFS DRCC under 922 KAR 2:090	$50 initial / $25 renewal	60-180 days from application
Type II Family Home license (7-12 children)	CHFS DRCC under 922 KAR 2:090	$50 initial / $25 renewal	60-120 days
Certified Family Child-Care Home (1-6 children)	CHFS DRCC under 922 KAR 2:100	$10 initial / $10 biennial	60-90 days
OIG-DRCC-01 application form	CHFS Division of Regulated Child Care	Free	Initial filing
Background check (per adult)	CHFS Child Care Background Check program (KSP + FBI + KCMR)	~$60-$80/person	4-6 weeks
Director qualifications	922 KAR 2:090 Section 10	Verification of credentials	Hire before licensing decision
Staff orientation training	Cabinet-approved orientation (6 hrs)	$50-$150/person	Before first day with children
First-year staff training	9 hrs ECE + pediatric abusive head trauma	Varies; ECE-TRIS tracks	Within first year
Annual staff training	15 hrs/year (July 1-June 30)	Varies; ECE-TRIS tracks	Each license year
CPR + First Aid certification	922 KAR 2:090 Section 11	$60-$120/person	Before unsupervised care
Workers’ compensation	KEMI or private carrier (KRS 342.340)	NCCI 9059 ~3%-6% payroll	First employee
Local zoning + Certificate of Occupancy	City/county building department	$200-$2,000+	Before licensing site visit
State sales tax registration	Kentucky Department of Revenue (only if selling tangible goods)	Free	Optional unless selling merchandise

How to Start a Daycare in Kentucky (Step by Step)

Step 1: Choose Your Child-Care Track

Kentucky regulates three distinct tracks under 922 KAR Chapter 2 (Cabinet for Health and Family Services, Office of Inspector General, Division of Regulated Child Care):

Type I Child-Care Center (922 KAR 2:090)

Licensed for “four (4) or more children in a nonresidential setting” or “thirteen (13) or more children in a designated space separate from the primary residence” per 922 KAR 2:090 Section 2(1). This is the standard center model — leased or owned commercial space, 12+ children typical, full-staff operation. Initial license $50, annual renewal $25.

Type II Family Child-Care Home (922 KAR 2:090)

“The primary residence of the licensee in which child care is regularly provided for seven (7), but not more than twelve (12), children including children related to the licensee” per 922 KAR 2:090 Section 2(2). The licensee resides on premises. Same $50/$25 fee structure but with home-environment-specific facility rules.

Certified Family Child-Care Home (922 KAR 2:100)

For 1-6 children in your residence. Certified rather than licensed but still subject to substantially the same health and safety rules. $10 initial fee, $10 biennial renewal — by far the lowest barrier to entry. Most certified family homes serve 4-6 children full-time and supplement with after-school care. The certified family home is the right starting point if you don’t have commercial financing and want to test the market.

Step 2: Form Your Business Entity

Most Kentucky child-care operators choose an LLC structure for liability protection. File Articles of Organization through Kentucky Business One Stop for $40. Plan to file your $15 annual report between January 1 and June 30 each year. Get a free EIN from IRS.gov before applying for the CHFS license — your facility cannot be licensed in your personal name once any employees are hired. Register for the LLET (Limited Liability Entity Tax) — note that the new $100,000 gross-receipts exemption beginning January 1, 2026 will exempt most small certified family homes from LLET entirely.

Step 3: Submit OIG-DRCC-01 to CHFS Division of Regulated Child Care

The initial license application is Form OIG-DRCC-01, Initial Child-Care Center License Application. The fee is $50, nonrefundable. Corporations and LLCs must include a current Certificate of Existence from the Kentucky Secretary of State; partnerships must provide written statements from each partner. Per 922 KAR 2:090 Section 4(2), the Division can issue a preliminary license for up to six months while you complete background checks, hire staff, and finish facility prep. The full license includes premises, designated licensee, age categories, and “the maximum number of children allowed under center supervision at one (1) time” per Section 6(7).

What CHFS Looks For During the Site Visit

• Indoor square footage: 35 sq ft per child minimum, exclusive of kitchen, bathrooms, hallways, storage
• Outdoor square footage: 60 sq ft per child minimum, separate from indoor space
• Fenced playground if outdoor space is used
• Sleeping arrangements meeting safe-sleep rules for infants (firm flat surfaces, no soft bedding/bumpers, sleep-on-back posture)
• Diapering and food prep areas physically separated
• Working smoke detectors, CO monitors, fire extinguishers, posted evacuation routes
• Background check clearances on file for every staff member and household member
• TB screening documentation for all staff
• Director credentials documented (transcripts, certifications, prior employment letters)
• Local zoning approval and Certificate of Occupancy

Step 4: Background Checks Under 922 KAR 2:280

Kentucky’s Child Care Background Check program is among the more rigorous in the southeast. Required clearances per 922 KAR 2:280:

• Kentucky State Police criminal records check (~$22 per person)
• FBI fingerprint-based national check ($23.85)
• National Sex Offender Registry check
• Kentucky Caregiver Misconduct Registry (KCMR) check
• Out-of-state checks in any state where the person resided in the prior 5 years
• Disqualifying offenses: violent felonies, sex offenses, child abuse/neglect, financial exploitation of vulnerable adults, drug offenses within the last 5 years (with rehabilitation review process)

Submit through the CHFS Background Check Unit. Clearance letters are valid until rechecked (every 5 years). You cannot legally allow an unclearcd individual to work or be present during care, and CHFS conducts unannounced spot-check inspections — operating with a non-clearcd staff member is grounds for license revocation.

Step 5: Director and Staff Qualifications

Director Requirements (922 KAR 2:090 Section 10)

The director must be at least 21, have a high school diploma or GED, and meet one of multiple credential pathways. For Type I:

• Bachelor’s degree in early childhood education, child development, or closely related field, OR
• Associate degree in same with experience working with children, OR
• Three years of full-time paid experience working directly with children, OR
• Combination of college credit hours and child-care experience meeting Section 10(2) substitution rules

Type II directors must meet Type I requirements or satisfy two of three alternative criteria (HS/GED + Commonwealth Child Care Credential + 1 year experience). Most Type I directors hold a CDA (Child Development Associate) credential or higher.

Staff Training Requirements (922 KAR 2:090 Section 11(16))

• Initial: 6 hours of cabinet-approved orientation covering federal health and safety requirements and child abuse recognition before first day with children
• First year: 9 hours of cabinet-approved early care and education training including pediatric abusive head trauma training
• Annual: 15 hours of cabinet-approved training between July 1 and June 30 each year, with abusive head trauma refresher every 5 years
• CPR + First Aid: certified before unsupervised care under Section 11(3)-(4)
• Tuberculosis screening: documentation required at hire under Section 11(1)

Kentucky uses ECE-TRIS (Early Care and Education Training Records Information System) to track every staff member’s training hours. Each staff member has an account; failure to maintain training currency is a top citation in CHFS inspections.

Step 6: Configure Ratios and Group Sizes Per 922 KAR 2:120

Staff-to-child ratios and group sizes are codified in 922 KAR 2:120 (last amended February 13, 2025). For Type I centers — group sizes apply only to Type I:

Age Group	Ratio	Max Group Size
Infants (0-12 months)	1:5	10
Young Toddlers (12-24 months)	1:6	12
Older Toddlers (24-36 months)	1:10	20
Preschool (3-4 years)	1:12	24
Preschool (4-5 years)	1:14	28
School-age (5-7 years)	1:15	30
School-age (7+ years)	1:20-1:25	30

Per Section requirements, children must be “within scope of vision and range of voice” with qualified staff at all times, with name-to-face recognition required during transitions between locations (entering/exiting playground, moving between classrooms, field trips).

Kentucky’s preschool 4-5 ratio of 1:14 is more lenient than Pennsylvania (1:10), Massachusetts (1:10), and most northeastern states; this is a real cost advantage for Kentucky operators serving 4-5 year olds.

Step 7: Enroll in Kentucky All STARS

Kentucky All STARS is the state’s five-level Quality Rating and Improvement System (QRIS), administered by the CHFS Division of Child Care under DCBS (separate from the licensing function under DRCC).

• Level 1: Automatic for every newly licensed Type I, Type II, or certified family child-care home — meeting all CHFS regulatory standards
• Level 2: Voluntary; requires evidence of classroom and instructional quality plus staff qualifications and PD
• Levels 3-5: Voluntary; require an Environment Rating Scale observation by trained external observers (ITERS-3 for infant/toddler; ECERS-3 for preschool; FCCERS-3 for family homes; SACERS for school-age) plus evidence across multiple domains beyond regulatory minimum

Financial incentives: Each STAR level unlocks a one-time STAR Achievement Award plus quarterly quality incentive payments scaled to program size, the number of subsidy children served, and the level of STAR attainment. CCAP-eligible programs at higher STAR levels also command higher reimbursement rates. For a 50-child Type I center serving 30% subsidy children, climbing from Level 1 to Level 4 typically adds $20,000-$40,000 per year in incentive revenue.

Step 8: Child Care Assistance Program (CCAP)

The Child Care Assistance Program, administered by CHFS Division of Child Care under DCBS, is Kentucky’s CCDBG-funded subsidy program. Major changes from the 2024-2026 biennium budget:

• Eligibility expanded from 160% of federal poverty level to 85% of State Median Income ($40 million appropriation) — far more families qualify than under the previous threshold
• Child care center employees can now use CCAP for their own children ($30 million) — addresses workforce shortage by making the industry’s own employees eligible regardless of household income
• Reimbursement rates set at the 80th percentile of market rates — higher than CCDBG floor and competitive with private-pay rates in many markets
• HB 499 Employee Child Care Assistance Partnership pilot ($15 million) — matches employer contributions to employee child-care costs at a 1:1 or 2:1 state match (verify current match ratio with the Department for Community Based Services)

Provider participation: Sign a CCAP Provider Agreement with CHFS. Reimbursement is paid monthly for enrolled subsidy children. CCAP enrollment unlocks a meaningful revenue stream — most full-enrollment centers in lower-income markets derive 30-60% of revenue from CCAP. Kentucky’s expansion to 85% SMI makes this a sustainable revenue base in metropolitan and small-town markets alike.

The fiscal cliff warning: The Kentucky Center for Economic Policy has flagged a $330 million child-care fiscal cliff when federal CCDBG enhancement funding expires. Build your business model around the 80th-percentile rate but plan a contingency for reimbursement rate compression in the 2026-2028 biennium if state funding doesn’t fully replace federal supplements.

Major Cities and Local Layer

Louisville Metro

Louisville Metro Government Inspections, Permits, and Licensing handles zoning and Certificate of Occupancy for child-care facilities. Most Louisville neighborhoods allow Type I centers in C-1 commercial zones; certified family homes in residential zones generally need a conditional use permit. Plan $500-$2,000 in zoning + occupancy + fire marshal fees. Louisville Metro Government has explored but not enacted a local paid sick leave law that would affect daycare staffing costs. The Louisville Free Public Library’s Family Place sites partner with several local Type I centers for early-literacy programming.

Lexington-Fayette

LFUCG Division of Building Inspection handles Certificate of Occupancy. The Children’s Cabinet of the Bluegrass coordinates Lexington-area early childhood services. Lexington’s child-care market is undersupplied for infant/toddler slots due to Toyota Manufacturing Kentucky and University of Kentucky workforce demand — quality operators with infant rooms have measurable competitive advantage.

Northern Kentucky

The CVG/Amazon Air growth has attracted thousands of relocating workers without infant-care availability. Boone County, Florence, and Erlanger have particular shortages. Northern Kentucky CHFS regional office handles inspections; expect more conservative interpretations of 922 KAR 2:120 supervision rules due to staffing concerns about cross-state reciprocity (parents from Cincinnati Ohio enrolling Kentucky children).

Other Markets

Bowling Green/Warren County has Western Kentucky University’s Early Childhood Center as a benchmark. Owensboro/Daviess County has measurable shortages around the Don Moore Auto Group and Kimberly-Clark plants. Eastern Kentucky coal counties have high Head Start and CCAP enrollment but very limited private-pay market.

Cost to Start a Daycare in Kentucky

Certified Family Child-Care Home (1-6 children)

Item	Estimated Cost
Articles of Organization (KY SOS)	$40
Annual report year 1	$15
Certified Family Home certification fee	$10
Background checks (operator + spouse)	$120-$160
CPR/First Aid (operator)	$60-$120
TB screening	$30-$60
Cabinet-approved orientation (6 hrs) + first-year training (9 hrs)	$150-$300
Outdoor playground equipment + fence	$2,000-$6,000
Cribs, cots, supplies	$800-$2,000
Liability insurance + workers’ comp (1 employee)	$1,800-$3,500/year
Certified family home total	$5,025-$12,205

Type I Child-Care Center (30-50 children)

Item	Estimated Cost
LLC formation + EIN	$40
Initial Type I license	$50
Build-out / lease + tenant improvements (existing facility vs new)	$15,000-$50,000
Furniture, equipment, learning materials	$15,000-$30,000
Outdoor playground (60 sq ft × 50 children + safety surface + fence)	$15,000-$40,000
Background checks (8-12 staff)	$500-$960
Director hire (3-month payroll prep)	$10,000-$15,000
Staff hires + 6-hour orientation each	$3,000-$6,000
Insurance package (liability + property + workers’ comp)	$6,000-$15,000/year
Marketing + enrollment	$2,000-$5,000
Working capital (3 months operating)	$30,000-$80,000
Type I center total	$96,590-$242,050

Related Kentucky Business Guides

• Starting a Business in Kentucky: Complete Guide
• Kentucky Cleaning Service Guide
• Kentucky Food Truck Guide

← Back to all Kentucky business guides

Frequently Asked Questions

What kind of daycare license do I need in Kentucky?

Three regulated tracks under 922 KAR Chapter 2: Type I Child-Care Center (922 KAR 2:090) for 4+ children in non-residential setting or 13+ in a designated separate space; Type II Family Child Care Home (922 KAR 2:090) in your primary residence with 7-12 children; Certified Family Child Care Home (922 KAR 2:100) in your residence for 1-6 children. The CHFS Division of Regulated Child Care under the Office of Inspector General licenses Type I and Type II.

How much does a Kentucky child-care center license cost?

$50 initial license fee under 922 KAR 2:090 Section 7(1), $25 annual renewal under Section 7(2). Certified family child-care home is $10 initial / $10 biennial. The bigger startup costs are facility build-out (35 sq ft indoor + 60 sq ft outdoor per child), background checks (~$60-$80 per adult), staff training, and zoning/occupancy compliance. Total realistic startup for a 30-50 child Type I center: $96,590-$242,050.

What are the staff-to-child ratios in Kentucky?

Per 922 KAR 2:120 (last amended February 13, 2025): infants under 12 months 1:5 (max group 10), toddlers 12-24 months 1:6 (max group 12), toddlers 24-36 months 1:10 (max group 20), preschool 3-4 years 1:12 (max group 24), preschool 4-5 years 1:14 (max group 28), school-age 5-7 years 1:15 (max group 30), and school-age 7+ years 1:20-1:25 with max group 30. Group sizes apply only to Type I centers. Kentucky’s 1:14 preschool ratio is more lenient than most northeastern states.

What is Kentucky All STARS?

Kentucky All STARS is the state’s five-level QRIS, unified across child-care centers, certified family homes, Head Start, and public preschool that receive public funding. Every licensed Type I, Type II center and certified family home is automatically enrolled at Level 1. Levels 2-5 are voluntary and unlock STAR Achievement Awards plus quarterly quality incentive payments scaled to program size, subsidy enrollment, and STAR level.

Does Kentucky have a child-care subsidy program?

Yes — the Child Care Assistance Program (CCAP) administered by CHFS. The 2024-2026 biennium expanded eligibility from 160% of federal poverty level to 85% of State Median Income. The General Assembly appropriated $40M for the eligibility expansion, $30M to allow employees of child care centers to use CCAP for their own children, and $15M for the HB 499 Employee Child Care Assistance Partnership pilot. Reimbursement at the 80th percentile of market rates.

What background checks does Kentucky require for daycare workers?

Under 922 KAR 2:280, every applicant, director, employee with potential child contact, anyone with supervisory or disciplinary control, and every household member 18+ in a Type II family home must clear: Kentucky State Police criminal records check, FBI fingerprint-based national check, sex offender registry, and Kentucky Caregiver Misconduct Registry. Out-of-state checks for anyone who lived outside Kentucky in the prior 5 years. Rechecks every 5 years.

Are daycare services subject to Kentucky sales tax?

No. Child-care services are exempt from the 6% sales tax under KRS 139.495. The HB 487 of 2018 and HB 8 of 2022 service-tax expansions did not extend to licensed child care. This is a meaningful difference from landscaping or janitorial services that became taxable in 2018. Daycares register with the Kentucky Department of Revenue only if they sell tangible goods (snack vending, take-home crafts, summer camp merchandise).

Kentucky-Specific Daycare Resources

Resource	Use	Where
CHFS Division of Regulated Child Care (OIG)	Type I/II licensing, certifications, inspections	chfs.ky.gov/agencies/os/oig/drcc
CHFS Division of Child Care (DCBS)	CCAP subsidy provider agreement, Kentucky All STARS	chfs.ky.gov/agencies/dcbs/dcc
922 KAR 2:090 (center licensure, eff. 7/18/2025)	Type I/II rules	apps.legislature.ky.gov/law/kar
922 KAR 2:120 (health and safety, am. 2/13/2025)	Ratios, group sizes, square footage	apps.legislature.ky.gov/law/kar
922 KAR 2:280 (background checks)	Background check rules, disqualifying offenses	apps.legislature.ky.gov/law/kar
ECE-TRIS	Track staff training hours, find approved courses	ece-tris.org
Kentucky Governor’s Office of Early Childhood	Kentucky All STARS info, ECE policy	kyecac.ky.gov
Child Care Aware of Kentucky	Provider technical assistance, training, supports	childcareawareky.org
Kentucky Center for Economic Policy	CCAP analyses, fiscal cliff warnings	kypolicy.org
Kentucky Youth Advocates	CCAP family FAQ, advocacy	kyyouth.org