I generally avoid mentioning grades when academic levels aren't the real question... I'll say that "we don't really do grades because we homeschool" and then either tell them his age, or figure out what grade that matches up to, or whatever seems appropriate.
But when people are asking about academics, we do have him skipped up (one or two grades depending on what cutoffs you use). We didn't make a decision about it, though, until there was some benefit to doing so -- in our case, being allowed to start competing in the science fair and testing through CTD/NUMATS (had to be 3rd grade for both). Also around that point, when he was barely-seven, it became clear that claiming he was a 2nd grader got more negative attention than claiming he was a in 3rd and grade-skipped. I had someone actually snort when I answered with his age-grade (2nd).... no one was believing it anyway, and that was without much detail on what he was doing at home.
In our case at least, as much crap as I get for having skipped him (and I get plenty...), it would be worse overall to claim his age-grade. Not just the snorting, but this year, for instance, he was at the top of his division for the science fair (even though by age he should have been at the bottom) and still stuck out like a sore thumb, right up through the state competition. I'm hopeful that next year in the next division he'll have a little more company and not so obvious a mismatch. But my point is, there are downsides to skipping, even in a homeschool, and you have to have some benefits to at least balance them out.
Hope this helps!
