Independence day in Budapest

For what it is worth, "Independence Day" in Hungary is March 15 (for the 1848 Revolution and War of Independence).

August 20th in Hungary is the feast day (a religious event, not an all you can eat event) for King Stephen I of Hungary (who founded the Kingdom of Hungary as a Christian State).

Hello and welcome to Budapest.
I found, being new here in August 2013, that in the evening anywhere near he Lanchid you can get a great spot, you will be dazzled by fire-works in the night. During the day on the Buda side I found that there was a great food festival. Here I enjoyed music, fine Hungarian food and wines and palinkas

Everything is a religious event in The Land of Mary :-/

I'd recommend the "Mestersegek Utcaja", the whole-day folkart-handscrafts fair usually spanning from the "Budai Var" castle all the way across the "Lanchid" bridge.
Do not attempt to drive that day at all!
Fly with your largest suitcase, mostly empty, make sure you have plenty of Forint cash for the day because the vendors can't take credit cards and you'll want to buy tons of nice things. Keep your valuables safe from thievs in the crowd though.

The fireworks display is supposed to be the main attraction, but it's way too crowded and loud for my taste. I strongly recommend watching it from within walking distance of your hotel because the transportation network is overloaded for hours afterwards.