Note: "While Leo and his brothers, after *coming in contact with Splinter when he was human, mutated into humanoid turtles.*"
Leo's turtle DNA was fused with Splinter's human DNA to create the humanoid turtle we know and love. But that means he now carries some of Splinter's genes.
And Karai is Splinter's biological daughter. Karai and Leo both share DNA/genes with Splinter. So Leorai is technically incest.