If a user is made inactive, is their time still included in reports?

All time entries stay in the system and are displayed in the reports, no matter if a user is deleted/inactive, or if the project is archived or the task marked as done (entries disappear only when deleted manually, either by the user who created them or by admin).

You can see the time entries of deleted/inactive users in the e.g. summary report when you group it by user and export the full report.