Numerical modeling of energy efficient electrical machines requires accurate and fast calculation of losses. One such loss component is core losses related to magnetic material degradation due to the cutting of electrical sheets. This paper analyzes the application of higher order finite elements for precise and computationally efficient modeling of these cutting related losses. The accuracy of higher order elements is compared with highly dense first order elements. Finally, a time-harmonic model of an induction machine with presented higher order elements is simulated and effect of cutting on performance parameters has been analyzed.