Welding induces microstructural changes in the base metal, forming a heat-affected zone (HAZ) that is especially prone to strength degradation in high-strength steel (HSS) connections. While the mechanical behavior of welded joints is strongly influenced by the softened HAZ, most existing research has focused on its tensile and fatigue properties, with limited attention given to its shear behavior, despite evidence of shear failure mechanisms in certain welded structures. Building on recent advances in damage modeling, this paper calibrates a shear-modified Gurson-Tvergaard-Needleman (GTN) model tailored for the HAZ. The GTN model, which uses void volume fraction as a damage index and accounts for microvoids and stress triaxiality, is extended here to better capture shear-dominated failure modes. In the meantime, shear tests were conducted on coupon specimens extracted from butt-welded cold-formed rectangular hollow sections fabricated from three steel grades and three thicknesses. Load-deformation curves and local strain measurements are obtained from these shear tests. Finite element (FE) simulations of the HAZ, incorporating the shear-modified GTN model, are conducted. The experimentally measured load-deformation curves are used to calibrate the parameters of the shear-modified GTN model, while the measured local strains serve to validate the FE model. Practical values for the key parameters of the shear-modified GTN model are recommended for engineering applications. The estimated ultimate load carrying capacity based on the proposed model is in close agreement (approximately 5 %) with the experimental values. The limitations of the proposed model and directions for future research are also pointed out.