Should zakaah be paid on haraam wealth?
Question

                A man has acquired a great deal of wealth (which reaches the nisaab or minimum threshold at which zakaah becomes due) by means of haraam ways, such as selling alcohol, music or drugs. Does he have to pay zakaah?.
Praise be to Allah.Zakaah is not due on haraam wealth, nor is it 
    valid, because it does not really belong to the one who in whose possession 
    it is, and one of the conditions of zakaah is that the wealth should belong 
    to the person. And Allaah is Good and accepts nothing but that which is 
    good. The Prophet  (peace and blessings of Allaah be upon him) said:
    “O people, Allaah is Good 
    and only accepts that which is good. Allaah commanded the pious to follow 
    the same commandments as He gave to the Messengers. He says (interpretation 
    of the meaning):
‘O (you) 
    Messengers! Eat of the Tayyibaat [all kinds of Halaal (lawful) foods which 
    Allaah has made lawful (meat of slaughtered eatable animals, milk products, 
    fats, vegetables, fruits)] and do righteous deeds. Verily, I am 
    Well-Acquainted with what you do’ [al-Mu’minoon 23:51]
‘O you who 
    believe (in the Oneness of Allaah — Islamic Monotheism)! Eat of the lawful 
    things that We have provided you with’ [al-Baqarah 2:172]
Then he mentioned 
    a man who has travelled on a long journey and is 
    dishevelled and 
    covered with dust; he stretches forth his hands to the heaven, (saying) “O 
    Lord, O Lord”, but his food is haraam, his drink is haraam, all his 
    nourishment is haraam, so how can he du’aa’ be accepted?” Narrated by Muslim 
    (1015).

    What he should do is get rid of that haraam wealth. He should 
    return it to its owners if it was stolen or seized by force, and he should 
    donate it to charity if it came from selling drugs, alcohol, music and the 
    like. 

    It says in al-Mawsoo’ah al-Fiqhiyyah (23/248): Haraam 
    wealth, such as that which is taken by stealing, seizing by force, bribery 
    or riba etc does not really belong to the one in whose possession it is, and 
    he does not have to pay zakaah on it, because zakaah is due on things that 
    actually belong to a person. And zakaah is a purification for the one who 
    pays it and for the wealth of the one who pays it, because Allaah says 
    (interpretation of the meaning):  

    “Take Sadaqah (alms) from their wealth in order to purify 
    them and sanctify them with it”

    [al-Tawbah 9:103]

    And the Prophet  (peace and blessings of Allaah be upon 
    him) said: “Allaah does not accept zakaah from any haraam wealth.” So haraam 
    wealth is all impure and cannot be purified. 

    What should be done with regard to haraam wealth is returning 
    it to its owner if it is possible to find out who he is, otherwise it should 
    all be given away so as to get rid of it, not so as to give it in charity. 
    This is agreed upon among all madhhabs. 

    The Hanafis say: If the ill-gotten wealth reaches the nisaab, 
    zakaah is not required from the one in whose possession it is, because he is 
    obliged to give all of it, so there is no point in saying that he must give 
    some of it in charity.

    In al-Sharh al-Sagheer by al-Dardeer, who is a 
    Maaliki, it says: Zakaah is required from the one who owns the nisaab, and 
    it is not required of one who is not the owner, such as one who took it by 
    force or the one who is keeping it for someone else. 

    The Shafaa’is say –as was narrated by al-Nawawi from 
    al-Ghazaali, and he also confirmed it – that if a person does not possess 
    anything but purely haraam wealth, he does not have to do Hajj or pay 
    zakaah, and he does not have to offer expiation in the form of wealth. 

    The Hanbalis say that use of wealth that was seized 
    unlawfully for shar’i purposes is haraam and is not valid. This is like 
    doing wudoo’ with water that was seized unlawfully or praying in a garment 
    that was seized unlawfully or in a place that was seized unlawfully, and it 
    is like paying zakaah from wealth that was seized unlawfully or doing Hajj 
    with such wealth. Any transaction involving this (haraam) wealth, such as 
    selling, renting etc, is invalid.

    End quote. 

    See also question no. 78289 and 
    26. 

    And Allaah knows best.