An urban legend may be a story you hear by word of mouth from an friend or family member, or a message you receive via forwarded email, text or social media.
Consider what form the information took when it was passed along to you. Was it a narrative — that is, a story told as a sequence of linked events with a beginning, middle and end? Did it feature a surprising twist and/or end with a "punch line" that sounded like a joke, or the plot of a television show? If so, it may have been an urban legend. Proceed with skepticism.
Most often, urban legends walk a fine line between outlandishness and believability. Does the story you heard seem a little suspect, yet kind of believable? Was it told to you as if it's true? Often the teller of an urban legend will even begin with the statement, "This is a true story." When someone feels they need to affirm the accuracy of what they're about to say beforehand, pay close attention. They may not fully believe what they themselves are saying.
Have you heard the same story more than once from different sources, possibly even with different names and details? Stories tend to change and grow over time as they're told and retold by different people. If there's more than one version, it might be an urban legend.
Ask yourself whether there's evidence at hand that contradicts the story you've been told. Are there commonsense reasons to disbelieve it? Does anyone else seem to disbelieve it? Stay skeptical. Think critically.
Does the story seem too good to be true, or too horrible or too funny to be true? If so, there's a good chance you've got an urban legend on your hands.
Do some investigating. Research the factual claims in the story to see if there is published evidence to support or contradict them. Challenge the teller of the tale to produce evidence that what they've told you is true. The burden of proof is on them.