Iron powder magnetic cores are used as soft magnetic rotors, in micro special motors such as BS brake motors, refrigerator compressor motors and brushless servo motors. Heat treatment of iron powder played an important role in the magnetic properties and loss of the motor cores. After the annealing process, the cracks and the pores on the surface of the powder decreased which in turn decreased the micro-hardness. The Vickers-hardness of the powder decreased from 50–42, while the resistance of the cores increased by 87% after annealing at 400°C for 30 min. The amplitude permeability and magnetic loss of the cores reached the maximum and minimum values, respectively. The magnetic loss of the cores was separated into hysteresis loss and eddy current loss by Stoppels Method which were decreased by the annealing process.