This study presents a simple hysteretic model to reproduce the stress–strain relationship of superelastic NiTi shape memory alloys (SMAs). The proposed model explicitly includes the functional degradation of SMAs, which has been ignored in earthquake engineering applications. This effect causes a reduction in the transformation stress and accumulation of residual strain. Because SMA devices are mainly used for seismic retrofit and account for a small portion of the structural system, their numerical model should not increase the computational time needed to perform nonlinear dynamic analyses. Computational efficiency can be achieved by representing their stress–strain response in a phenomenological way. Additionally, practitioners who may not have a professional background in materials science can easily manipulate the proposed model for the appropriate reproduction of model parameters such as transformation stress and residual strain. The ability to properly reproduce the experimental stress–strain response is validated for the test results of 65 NiTi SMA specimens. The amount of forward and reverse transformation stress degradation and the amount of residual strain accumulation per cycle, which are observed in the experimental results, are captured with reasonable accuracy in the proposed model. Additionally, the response of SMA braces in a four‐story steel moment frame is modeled using the proposed model to examine the residual story drift of the SMA braced frame under a set of ground motions. At higher intensity levels, the functional degradation of SMA braces increased the residual story drift up to 60% in comparison to the SMA‐braced model without functional degradation.