Hungary Tax Treaty Ended: What US Expats Owe

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A Hungarian tax resident who collected $40,000 of US-source dividends after January 1, 2024 can lose $6,000 in extra US withholding: the old 15% treaty cap is gone, and the statutory 30% rate on US-source dividends, interest, and other FDAP income is now the default for many non-US persons. US citizens living in Budapest do not get a free pass either. Hungary still taxes worldwide income at a flat 15% personal income tax, and NAV’s 2026 guidance treats the United States as a non-treaty country, which leaves a residual Hungarian tax floor of 5% on separately taxed foreign income even after you credit US tax.

This is a supporting playbook for people already comparing Hungary’s 9% corporate rate or White Card, and for anyone who still quotes the 1979 convention as if it were live. It is not. The IRS treaty index now lists Hungary with a termination caution, and US citizens still file Form 1040 on worldwide income. Use this guide to map withholding, Hungarian unilateral credits, the Foreign Earned Income Exclusion, and Form 1116 before you file. For the broader cluster of treaty mechanics, start with the Expat Tax & Finance hub, then come back to the Hungary-specific math below.

What actually ended on January 1, 2024?

The United States notified Hungary on July 8, 2022 that it was terminating the 1979 income tax convention. Treasury’s announcement set a January 8, 2023 termination date, then delayed the tax effect. As of January 1, 2024, the convention no longer applies to amounts paid or credited that are subject to tax withheld at source. For other taxes, it ceased for taxable periods beginning on or after that date.

The IRS restates that timeline on its Hungary tax treaty documents page and tells withholding agents they may not accept treaty claims on payments made January 1, 2024 or after. The A-to-Z treaty list now flags Hungary as terminated. There is no replacement convention in force as of September 2026.

What did not end

The US–Hungary Social Security totalization agreement is a separate instrument. It was signed February 3, 2015 and entered into force September 1, 2016. SSA still publishes the agreement text. Certificate-of-coverage planning for posted employees and many self-employed workers still runs through that agreement, not the dead income-tax treaty. FATCA reporting by Hungarian institutions, FBAR, Form 8938, and US worldwide taxation of citizens also continue.

Do I still owe US tax if I live in Hungary?

Yes. Citizenship-based taxation did not move when the treaty died. A US citizen or long-term resident still reports worldwide income on Form 1040. Hungary’s 15% flat PIT does not delete the US return, and there is no treaty tie-breaker to assign a single residence for dual residents.

NAV’s February 2026 booklet on individuals’ foreign-source income is explicit: after December 31, 2023 the 1979 convention is not applicable, and the United States is grouped with countries that have no double-tax agreement with Hungary. Hungarian tax residence still follows Hungarian domestic tests, including a 183-day presence test and center-of-vital-interests rules. A dual US–Hungarian citizen can be a worldwide taxpayer in both systems at once.

That is why the US tax treaty saving clause discussion on this site still matters for other countries, and why it does not rescue Hungary. There is no article left to invoke, so Form 8833 treaty positions based on the 1979 convention are the wrong tool for 2024-forward years.

Who actually pays the 30% US withholding?

The 30% statutory rate on US-source FDAP income is a nonresident-alien and foreign-entity rule. IRS W-8BEN instructions still describe the default: foreign persons are subject to 30% US tax on US-source interest, dividends, rents, royalties, and similar income unless a treaty reduces it. Hungary no longer supplies that reduction.

US citizens and US tax residents generally certify with Form W-9. Brokerage withholding then follows backup-withholding and Form 1099 rules, not the 30% NRA chapter 3 rate. Mixing those two populations is the most expensive error in this topic.

Income and recipient	Before 2024 (treaty in force)	As of 2024–2026 (no income-tax treaty)
US-source dividends paid to a Hungarian resident who is not a US person	Generally 15% US withholding under the old dividends article	Generally 30% US withholding; update W-8BEN; no Hungary treaty claim
US-source interest paid to that same non-US person	Often 0% at source under the old interest article	Generally 30% unless a domestic US exception applies (for example certain bank-deposit interest)
US-source dividends paid to a US citizen who is also a Hungarian tax resident	US tax on Form 1040; Hungary 15% with treaty coordination	US tax on Form 1040; Hungary 15% with only domestic NAV credits; 5% Hungarian residual floor on separately taxed income
Hungarian-source salary paid to a US citizen working in Hungary	Hungary 15% PIT plus contributions; US Form 1040 with FEIE or FTC	Same domestic rates; no treaty tie-breaker or MAP; FEIE or Form 1116 still available under US law
Dividends from a Hungarian company paid to a nonresident individual	Hungarian 15% PIT, possibly reduced by treaty	Domestic 15% still applies; US persons cannot claim a US–Hungary treaty cut

Data note: US withholding figures follow IRS chapter 3 / W-8BEN rules and the IRS Hungary treaty page, checked September 2026. Hungarian PIT and residual-credit rules follow NAV’s 2026 foreign-income booklet and can change by statute.

Brokerage paperwork for both reader types

If you are a US person, keep a US brokerage that will hold a foreign mailing address. Charles Schwab is the usual operator choice because it still serves many expats and reimburses ATM fees on the linked checking account. File W-9. Do not “fix” 30% withholding by handing the firm a W-8BEN; that form is for foreign persons.

If you are a Hungarian resident who is not a US person, tell every US withholding agent that the treaty claim expired. A 2023 W-8BEN that listed Hungary and a 15% dividend rate is a change-in-circumstances event. Expect 30% on many US dividends until a new convention exists.

How does Hungary’s unilateral credit actually work?

NAV’s 2026 guidance on income from non-treaty states is the replacement for the missing convention. Both countries may tax the same item. Hungary then uses domestic credits, not treaty exemption.

For income that belongs in the consolidated tax base (employment, many independent-activity items), NAV reduces Hungarian PIT by 90% of the income tax paid in the source country, but not by more than the 15% Hungarian tax on that same base. You cannot drive Hungarian PIT on that slice below zero with a fat US bill.

For separately taxed income such as many dividends and interest items, NAV also allows a credit for tax withheld in the source country. The remaining Hungarian PIT on that income cannot fall below 5% of the income. NAV’s own example: 22% foreign withholding would otherwise wipe out Hungary’s 15%, but the filer still owes 5% in Hungary.

Two US-side traps sit on top of that floor. First, the foreign tax credit on Form 1116 is limited to US tax on foreign-source income. Hungarian tax on US-source dividends often sits in the wrong basket for a full US credit. Second, you cannot claim FEIE on those dividends because they are not foreign earned income.

FEIE or foreign tax credit after the treaty?

US relief is now 100% domestic: section 911 on Form 2555, section 901/904 on Form 1116, or a mix on different income types. You still cannot double-dip the same dollar of earned income.

As of tax year 2026, the IRS maximum foreign earned income exclusion is $132,900 per qualifying person ($130,000 for 2025). The general housing cap is 30% of that figure, or $39,870 for a full 2026 qualifying year, before location-specific IRS housing notices. FEIE never covers self-employment tax, passive income, or CFC inclusions.

Hungary’s 15% PIT is below typical US marginal rates on wages above the FEIE ceiling, so many W-2 remote employees who qualify will still use Form 2555 on earned income and Form 1116 on leftover foreign tax. High earners who already pay 15% Hungarian PIT plus 18.5% employee contributions should not assume FEIE is always cheaper. Contributions are social-security-type levies; whether any portion is a creditable income tax is a facts-and-circumstances call under Publication 514, not a slogan.

Compare the two elections in detail in the FEIE vs foreign tax credit guide, then overlay Hungary’s 5% residual floor on investment income. Mercury Bank remains useful if you keep a US LLC or C-corp operating company while you live in Budapest, because US business cash should not be forced through a personal Hungarian account just to simplify NAV reporting.

Housing exclusion and stacking

Claim the foreign housing exclusion first. FEIE is limited to foreign earned income minus that housing amount. Section 911(f) stacking still pushes remaining taxable income into higher US brackets. None of those mechanics required a Hungary treaty, so they still apply.

Does self-employment tax still double up?

Often, unless you use the totalization agreement. The income-tax treaty’s death did not repeal the SSA agreement. Posted employees and many self-employed workers can still request a Certificate of Coverage so only one country’s social-security system applies. See the US totalization agreements workflow and the SSA Hungary agreement text.

Freelancers who skip the certificate can owe US self-employment tax (12.4% Social Security plus 2.9% Medicare, plus 0.9% Additional Medicare Tax above the statutory high-earner thresholds) on top of Hungary’s 18.5% employee-side contributions or the equivalent self-employed contribution rules. FEIE does not remove SE tax. That stack is a cash-flow problem, not a treaty footnote.

Owners of a Hungarian Kft still face US anti-deferral rules. A 9% Hungarian corporate rate does not block Form 5471, Subpart F, or GILTI/NCTI inclusions. The offshore company tax trap is the canonical warning; do not incorporate first and model US tax later.

What reporting still applies on both sides?

Hungarian banks report US persons under FATCA. You still file US information returns when thresholds hit, treaty or not.

• File FinCEN Form 114 (FBAR) if your foreign financial accounts exceeded $10,000 in aggregate at any time during the calendar year. File electronically with FinCEN, not as an attachment to Form 1040. The IRS FBAR page confirms the $10,000 test and the April 15 due date with an automatic extension to October 15.
• File Form 8938 with your 1040 if you live abroad and specified foreign financial assets exceed $200,000 at year-end or $300,000 at any time (unmarried or married filing separately). Joint filers living abroad use $400,000 / $600,000. The IRS Form 8938 thresholds page is the source.
• Hungarian individuals generally review or file the eSZJA return by May 20. NAV pre-fills employment data. Foreign dividends, US brokerage 1099s, and rental income usually need manual schedules. Confirm the current deadline on NAV each spring.

FBAR penalties are inflation-adjusted and can dwarf the tax at issue. Information-return failures are independent of whether you owed extra income tax because the treaty vanished.

Checklist: what to do this filing season

1. Confirm Hungarian tax residence under NAV rules (permanent home, center of vital interests, or 183 days). Do not assume a US address or days in third countries automatically turns Hungary off.
2. Inventory income by source and type: Hungarian wages, US wages, US dividends and interest, Hungarian dividends, capital gains, rental, Kft distributions, and Social Security.
3. For each US withholding agent, confirm W-9 versus W-8BEN. Replace any Hungary treaty claim dated before 2024.
4. Model FEIE versus Form 1116 on earned income using the 2026 $132,900 cap (or $130,000 if you are still finishing a 2025 return). Keep passive income out of Form 2555.
5. On Hungarian separately taxed US-source investment income, budget at least 5% residual PIT after foreign-tax credit, per NAV’s non-treaty booklet, unless your adviser documents a different statutory result.
6. If you are self-employed or on a secondment, request an SSA Certificate of Coverage under the Hungary totalization agreement before dual contributions accrue.
7. File FBAR if foreign accounts crossed $10,000, and Form 8938 if the abroad thresholds apply. Keep five years of account records.
8. If you own 10% or more of a Hungarian company, calendar Form 5471 and GILTI/NCTI modeling before you celebrate the 9% corporate headline.

Data notes / Sources checked

Thresholds and treaty status were checked in September 2026. Hungarian PIT, contribution rates, and unilateral credits can change in the annual tax package. US FEIE, housing caps, and Form 8938 figures adjust for inflation. A new US–Hungary income tax convention would change withholding and dual-residence results; none is in force as of this writing.

• US Treasury termination notice (July 15, 2022)
• IRS Hungary tax treaty documents and the IRS treaties A-to-Z list
• IRS FEIE limits for 2025 and 2026
• IRS About Form 1116 and Publication 514
• IRS FBAR $10,000 rule
• IRS Form 8938 specified-individual thresholds
• SSA US–Hungary Social Security agreement
• NAV 2026 booklet on individuals’ foreign-source income (United States listed as a non-treaty state; 90% / 5% residual rules)
• PwC Worldwide Tax Summaries, Hungary individual PIT 15% and contribution rates, last reviewed around year-end 2025

Conclusion

Hungary is still a low-rate EU base: 15% PIT, 9% corporate tax, and a totalization agreement that actually survived. What died is the income-tax convention that used to cap US withholding, assign Social Security and pension taxing rights, and paper over dual residence. US citizens keep Form 1040. Non-US Hungarian residents should expect 30% US withholding on many US-source dividends. Everyone who is a Hungarian tax resident should model NAV’s 5% residual floor on separately taxed non-treaty income before calling the move a tax cut.

If you already live there, fix withholding forms this quarter and rebuild your 1040 workpapers around domestic credits. If you are still choosing a country, compare Hungary’s cash-flow after the treaty loss, not the 1979 brochure.