This paper presents a novel analytical technique for predicting three-dimensional (3-D) magnet eddy current losses accounting the slotting effect of any pole-slot combinations for a surface mounted permanent magnet machine under any conditions of load. The slotting effect is incorporated from a subdomain model and the 3-D boundary conditions are imposed with the current vector potential to represent the 3-D eddy currents circulating in the magnets. The proposed model in polar coordinate system is demonstrated on a fractional slot rare-earth permanent magnet machine by analyzing its magnet losses as functions of axial and circumferential segmentations. The results have shown an excellent match with 3-D numerical calculations. The analytical prediction has also been validated by experimental tests. The interaction of the armature reaction field with the slotting harmonics is analyzed and their effect on eddy current loss in rotor magnets is established. The proposed technique is employed to evaluate the effect of slotting on magnet loss with increase in field weakening angle.