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This paper presents a framework for the inclusion of transient and residual foundation deformations within performance‐based seismic design of buildings. A refinement of existing displacement‐based design procedures is proposed that reduces iteration when obtaining the expected peak foundation rotation. Empirical equations are developed based on numerical time‐history analyses that provide an estimation of foundation residual deformations based on the foundation peak rotation. Additional complexities due to deformation within the foundation are discussed regarding how they influence the design and building performance. The design framework is complemented by a simplified analytical design procedure (i.e., hand calculations) to design building‐foundation systems. A design example is given for a six‐storey concrete wall building, which is analyzed by time‐history analysis to demonstrate the application and accuracy of the design procedure.