Does Giving an Interest-Free Loan Reduce Zakat?

Short answer: (1) No — a loan to a solvent, sure-to-repay borrower remains your wealth (a strong debt): it stays in your zakat reckoning every year; lending is not a route to lower zakat. Should it turn doubtful (weak), it then leaves the books — with a fresh hawl after recovery. (2) Reward: certainly — relieving a needy person's hardship is a great deed, and granting time or forgiving at settlement is greater still. Details: The goodly loan complements charity rather than replacing it — charity transfers ownership away, a loan returns; hence zakat liability persists on loans. Allah Himself calls it 'lending to Allah a goodly loan' with multiplied return. Practical advice: keep a loan ledger (dates, amounts, witnesses/writing — the guidance of Quran 2:282); on your zakat day that ledger is your strong-debt schedule. Evidence: Quran 2:245 and 57:11; Sahih Muslim 2699 ('whoever relieves a believer's distress...'); Quran 2:282; the athar of Uthman (Muwatta, Zakat). For complex individual cases, consult a qualified scholar.