What is the correct way to deal with money acquired through illicit means, which cannot be returned to its owners, and which cannot be given in charity because "Allah is good and accepts only good things," knowing that using it to buy household necessities is considered benefiting from it?

It is obligatory to dispose of ill-gotten gains. If it is not possible to return them to the source from which they were acquired, then they must be spent on general Muslim interests. For example, money taken from public funds should be given as charity to the poor and needy, or spent on public interests that do not yield personal benefit, such as paving roads or building schools. This charity is for the purpose of disposing of unlawful money, and the one who gives it will not be rewarded for it. It is not permissible to derive personal benefit from this money, even for purchasing personal items.