Natural progression. The first step in determining which grade a child should be in is natural progression. That means if your child began Kindergarten at the age of 5 they would naturally progress to 1st grade assuming they passed all of their tests. After first grade they would move on to second and the next year third. You get the picture. The child can move up a grade each year so long as they received passing marks. If not the child should be held back to repeat the same grade over until the information is mastered. This would follow the natural progression of any regular school system, but it just occurs at home.
Use a standardized test. There are several ways you can administer a standardized test to your child. The first option is to call your local school district and pay a few dollars for your child to take the standardized test with the other students. Basically they would sit in a classroom with the kids of the school and take their test. Testing usually lasts 3-5 days depending on the tests given. The other way to administer the test is to order them online and give them to your child yourself. Then mail the test back and wait for the results. One well recognized test is called the Iowa Test of Basic Skills. You can order the test for $40 using the link provided for you at the end of this article.
Place your child in the appropriate grade level based on their scores. Scores are written out in years and months. So if the math part of the test came back as 5.3 then you can say your child has mastered math up to the 5th grade level, three months in to the school year. That's great news if your child is currently in 5th grade or less, but if your child is in 6th grade you may want to consider having him or her go back a grade. One important thing to note is that you do not have to hold your child back a year in all subject areas. When homeschooling you have the freedom to use whatever curriculum is best. If your child scored a 7.6 in reading and they are in the 5th grade then you are going to want to buy them a 7th grade reading book. If their problem area is in math they may be using a 5th grade math book at the same time they are using a 7th grade reading book. This is perfectly acceptable. Concentrate on helping your child learn at the level they are on in each subject.
Use a curriculum that has a placement test. Alpha Omega Publications has placement tests for it's Lifepac Home School curriculum. Lifepac's are Christian homeschooling curriculum's and they come with placement testing. There are 5 subjects including Bible, Science, History and Geography, Math, and Language Arts. If you order their placement tests you can administer them at home and have immediate results. Answers are provided for you along with the grading system. Just follow the simple instructions with each of the 5 subjects and you will be able to see where your child should begin. Remember it is okay to use separate grades for each subject based on your child's scores. You can order the LifePac tests from the link provided for you at the bottom of this article. Expect to pay about $18 for a set of all 5 subjects.
Pay attention to your child. This is the final way you can decipher what grade your child should be placed in. If your child is 8 and they are bored with their 2nd grade curriculum then by all means bump them up to the 3rd grade curriculum. The other side is true as well. If your child is struggling with the 2nd grade curriculum then take them back to the 1st grade curriculum. You can do this with whichever subjects your child is ahead or behind on. In most cases some kids will be excelling in one area, but struggling in another. Don't punish the child by pulling them back a grade in areas that they are flourishing.