To transfer residency for two non-residents buying a home in San Francisco, they must first establish a valid reason for the move, such as employment relocation or family ties. They should file IRS Form 1040NR to claim non-resident status and consult a tax attorney or CPA to ensure compliance with federal and state laws. The buyers must prove intent to reside in San Francisco through documents like employment contracts, utility bills, or lease agreements. They will also need to pay the San Francisco transfer tax (1.5% of the property’s assessed value) and file a non-resident property tax return. After closing, they should update their tax filings and consider applying for a California driver’s license or state ID if they intend to stay long-term.

The process is critical to avoid penalties, as non-residents face higher tax rates and restrictions on deductions. The IRS requires non-residents to meet specific criteria, such as spending fewer than 183 days in the U.S. annually or not exceeding 914 days over three years. San Francisco’s transfer tax alone can cost non-residents up to $150,000 on a $10 million property, as noted by the San Francisco Tax Commission. Data from the California Board of Equalization shows non-residents accounted for 12% of home purchases in San Francisco from 2021-2023, reflecting rising interest despite high costs. IRS statistics reveal 8,200 non-residents filed Form 1040NR in California in 2022, underscoring the need for proper guidance. Failure to transfer residency correctly can result in back taxes, interest, and fines, as seen in 2022 when the IRS levied $2.3 million in penalties against non-compliant non-residents in California. Expert assistance ensures adherence to complex regulations and optimizes tax outcomes.