US-Hungary Double Taxation After the Treaty Ended

What happened to the US-Hungary tax treaty?

The 1979 income tax treaty between the United States and Hungary no longer applies. It has not been in effect since 1 January 2024, so both countries now tax cross-border income under their own domestic rules, with no treaty guarantee against being taxed twice.

The United States gave formal notice of termination on 8 July 2022. The treaty then stopped having effect for taxes withheld at source on amounts paid on or after 1 January 2024, and for all other taxes for tax periods beginning on or after that date (U.S. Treasury, IRS).

This touches a wide group: dual US-Hungarian citizens, Americans kept on a US salary while living in Budapest, remote workers, and anyone receiving US dividends, interest, or a pension. The sections below explain what actually changed and, just as important, which reliefs still protect you.

Why does a lapsed treaty cause double taxation?

A tax treaty does two jobs: it divides taxing rights between two countries and it guarantees a mechanism to cancel out double taxation. Remove it, and both systems apply at full strength to the same income.

The United States taxes its citizens and green card holders on worldwide income no matter where they live, a rule known as citizenship-based taxation (IRS). Hungary, in turn, taxes its residents on worldwide income at a flat 15% (NAV). Whether Hungary treats you as resident depends on the usual tests, set out in the guide to tax residency in Hungary.

With the treaty gone, the same salary or dividend can fall inside both nets at once. Relief now depends entirely on the one-sided rules each country offers on its own, and those rules are narrower and capped than the treaty ever was.

What US tax now hits your American-source income?

If you are a Hungarian resident who is not a US citizen or green card holder, US-source passive income now faces the full statutory US withholding rate of 30%, taken at source. Under the treaty, dividends were generally capped at 15% and many interest payments were exempt, so the increase is steep (PwC Tax Summaries).

This mainly affects Hungarian nationals and former Americans who receive US dividends, interest, royalties, or certain pension income. A US payer or broker withholds 30% before the money arrives, and there is no longer a treaty claim form to bring that rate down.

US citizens and green card holders living in Budapest are treated differently. They remain full US taxpayers, file a normal US return, and are not subject to the flat 30% non-resident withholding on their US accounts. Their double-tax risk sits on the Hungarian side instead, which the next sections cover.

How much US tax can you offset in Hungary?

Hungary still lets a resident credit foreign tax against Hungarian tax even without a treaty, but the relief is capped. For income from a non-treaty country such as the US, a resident may credit at most 90% of the foreign tax paid, and never more than the 15% Hungarian rate that applies to that income (Andersen).

A second limit bites too: the offset cannot push the Hungarian tax on that foreign income below 5%. So even when US tax has already been paid, Hungary keeps a minimum slice of the same income (Andersen).

The result is a partial offset, not a full one. On US dividends taxed at 30% in America, a Hungarian resident recovers only part of that against the Hungarian charge, which is exactly the gap the treaty used to close. For how the flat rate itself works, see the guide to Hungary's 15% flat income tax.

What relief still exists on the US return?

On the US side, the two main reliefs are not treaty-based, so they survived the termination untouched. The Foreign Earned Income Exclusion (FEIE) lets a qualifying American exclude up to $132,900 of foreign earned income for 2026, claimed on Form 2555 (IRS).

The Foreign Tax Credit (Form 1116) then offsets US tax with the Hungarian income tax already paid on the same income. It is often the stronger tool for people over the FEIE ceiling or with investment income, and it can be combined with the exclusion, though not stacked on the very same dollars (IRS).

Because Hungary's flat 15% is often lower than the US rate on higher incomes, the credit may not fully wipe out the US bill for wealthier residents, which is one reason the lost treaty still stings. Choosing and ordering the FEIE and the credit each year is where most of the real planning happens.

Is your social security still protected?

Here is the reassuring part: the income tax treaty and the social security agreement are two separate instruments, and only the tax treaty ended. The US-Hungary Social Security Totalization Agreement remains in force (it entered into force on 1 September 2016) and was not affected by the 2024 termination (U.S. Social Security Administration).

That agreement assigns your coverage to one country at a time, so an American working in Budapest does not pay into both the US and the Hungarian social security systems on the same earnings. It also lets you combine periods of coverage in each country toward a future benefit.

For self-employed Americans this matters a great deal, because without a totalization agreement they can owe US self-employment tax on top of Hungarian contributions. The agreement is precisely what keeps that particular double charge from coming back.

Who is most exposed to the change?

The exposure is uneven, and it helps to know where you sit. The people who feel the change most are:

• Dual US-Hungarian citizens, who file in both countries with no treaty tie-breaker to sort out residence or credits.
• Americans kept on a US payroll while living in Budapest, whose salary both systems can claim.
• Investors and retirees with US dividends, interest, or pensions now hit by 30% withholding at source.
• Freelancers billing US clients, who now navigate two domestic tax codes at once with no treaty referee.

People whose income is purely Hungarian-source and who are not US persons are largely unaffected, since there was little cross-border overlap to tax twice in the first place.

What should Americans in Hungary do now?

There is no way to opt out of the change, so the practical response is to plan around it. Sensible first steps include confirming which country counts you as tax resident, filing on time in both the US and Hungary, and keeping clean records of every foreign tax paid so the credits can actually be claimed.

Because two domestic tax codes now interact with no treaty to referee them, this is a situation where a cross-border tax advisor who handles both US and Hungarian returns earns their fee, especially where dividends, stock compensation, pensions, or a business are involved. General information like this guide cannot stand in for advice on your own numbers.

For the wider relocation picture, see the overview for US citizens moving to Hungary, and browse the rest of the Working and Taxes guides for each Hungarian tax explained in detail.

Frequently asked questions

Is there a US-Hungary tax treaty in 2026?

No. The 1979 income tax treaty was terminated by the United States and has not applied since 1 January 2024, so cross-border income is now taxed under each country's own domestic law (IRS).

Do Americans in Hungary still have to file a US tax return?

Yes. The US taxes citizens and green card holders on worldwide income wherever they live, so a US return is still required, using the Foreign Earned Income Exclusion and the Foreign Tax Credit to reduce or remove double taxation (IRS).

How much US withholding applies to US dividends now?

For a Hungarian resident who is not a US person, US-source dividends face the statutory 30% withholding at source, up from the 15% cap that applied under the old treaty (PwC Tax Summaries).

Did the treaty ending affect US Social Security contributions?

No. The separate Social Security Totalization Agreement, in force since 1 September 2016, still applies, so you do not pay into both countries' systems on the same earnings (U.S. Social Security Administration).

Can I still credit US tax against my Hungarian tax?

Only partly. Hungary allows a unilateral credit capped at 90% of the foreign tax and at the 15% Hungarian rate, and it cannot reduce the Hungarian tax on that income below 5% (Andersen).