Short answer
It depends where it came from. Money taken from people unjustly, by theft, fraud or overcharging, must be returned to them or their heirs. Money that cannot be returned, or that came from haram work such as selling alcohol, is given to the poor without hoping for reward. Interest has its own page. Then repent and stop the source.
Wealth taken from an owner without right must be returned to him or his heirs; if they cannot be found, it is given to the poor on his behalf. Pay earned from haram work, and other unlawful wealth with no owner to return it to, is given to the poor without the intention of reward. It does not count as zakat or sadaqah.
The four schools agree on this.
Explanation
The Prophet ﷺ said Allah is pure and accepts only what is pure, and he mentioned a traveller raising his hands to the sky while his food, drink and clothes are haram, and asked how such a person could be answered. He also warned of a time when people will not care whether their money comes from halal or haram.
What to do depends on the source:
- Stolen, scammed or wrongfully taken: return it to the owner, even anonymously, or to his heirs. If you cannot find them after a real effort, give it to the poor on the owner's behalf. See Is it haram to scam people?
- Gambling winnings: return them to the loser if possible, otherwise give them away. See Can a Muslim gamble?
- Pay from haram work, such as selling alcohol or making haram content: give it to the poor without hoping for reward.
- Bank interest: see Is interest from a savings account haram?
Things you bought with haram money, such as a phone, are a further question for a mufti; in many cases the scholars say you owe the amount rather than the item. If you cannot remember the exact amount, make a careful estimate and give a little more to be safe. If paying it all at once would ruin you, pay it off over time.
New Muslims are not asked to give away what they earned before Islam. The Quran says of riba that whoever stops after the warning may keep what is past (2:275). After that, the key is sincere repentance and finding halal income: see Which jobs are haram?
Ask a mufti about your own case. This answer explains the general ruling. When the details of your situation matter, as they do here, ask a qualified mufti and give them the full facts. Where to ask a scholar.
The evidence
Quran, Surah Al-Baqara 2:188
وَلَا تَأْكُلُوٓا۟ أَمْوَٰلَكُم بَيْنَكُم بِٱلْبَٰطِلِ وَتُدْلُوا۟ بِهَآ إِلَى ٱلْحُكَّامِ لِتَأْكُلُوا۟ فَرِيقًۭا مِّنْ أَمْوَٰلِ ٱلنَّاسِ بِٱلْإِثْمِ وَأَنتُمْ تَعْلَمُونَ ﴿١٨٨﴾
And do not consume one another's wealth unjustly or send it [in bribery] to the rulers in order that [they might aid] you [to] consume a portion of the wealth of the people in sin, while you know [it is unlawful].
Unjustly taken wealth must not be kept.
Quran, Surah Al-Baqara 2:275
ٱلَّذِينَ يَأْكُلُونَ ٱلرِّبَوٰا۟ لَا يَقُومُونَ إِلَّا كَمَا يَقُومُ ٱلَّذِى يَتَخَبَّطُهُ ٱلشَّيْطَٰنُ مِنَ ٱلْمَسِّ ۚ ذَٰلِكَ بِأَنَّهُمْ قَالُوٓا۟ إِنَّمَا ٱلْبَيْعُ مِثْلُ ٱلرِّبَوٰا۟ ۗ وَأَحَلَّ ٱللَّهُ ٱلْبَيْعَ وَحَرَّمَ ٱلرِّبَوٰا۟ ۚ فَمَن جَآءَهُۥ مَوْعِظَةٌۭ مِّن رَّبِّهِۦ فَٱنتَهَىٰ فَلَهُۥ مَا سَلَفَ وَأَمْرُهُۥٓ إِلَى ٱللَّهِ ۖ وَمَنْ عَادَ فَأُو۟لَٰٓئِكَ أَصْحَٰبُ ٱلنَّارِ ۖ هُمْ فِيهَا خَٰلِدُونَ ﴿٢٧٥﴾
Those who consume interest cannot stand [on the Day of Resurrection] except as one stands who is being beaten by Satan into insanity. That is because they say, "Trade is [just] like interest." But Allah has permitted trade and has forbidden interest. So whoever has received an admonition from his Lord and desists may have what is past, and his affair rests with Allah. But whoever returns to [dealing in interest or usury] - those are the companions of the Fire; they will abide eternally therein.
What a person earned before the warning reached him is not taken back.
Sahih Muslim 1015
Sahih... إن الله طيب لا يقبل إلا طيبا ...
"Allah is pure and accepts only what is pure."
Haram money is given away to be rid of it, not as charity seeking reward.
Sahih al-Bukhari 2083
Sahih... لا يبالي المرء بما أخذ المال أمن حلال أم من حرام ...
"A person will not care whether he takes money from halal or from haram."
Carelessness about the source of money is a sign of a corrupt time.
Where the ruling is recorded
- Radd al-Muhtar (Ibn Abidin), Kitab al-Hazr wa al-Ibaha, section on sale (fasl fi al-bay'), on unlawful wealth. Unlawful wealth is returned to its owner, or given to the poor if the owner is unknown.
Checked by our team. For a more accurate answer to your own situation, consult a scholar. Quran translation by Sahih International. Hadith Arabic from the standard editions of the six books and the Muwatta, with gradings as recorded there; the English is our own rendering. Spotted a mistake? Tell us.