Ask yourself whether the story is set in an imaginary world. Many fantasy stories are set in an alternative past which combines elements of real history (often the Middle Ages) and imaginative elements (as in the "swords and sorcery" genre exemplified by Tolkien's "Lord of the Rings"). Others are set in extraordinary locations such as underwater worlds or fantastic kingdoms.
Note whether any characters possess superhuman abilities. Fantasy literature often pits a protagonist who must discover and master his or her magical powers against an antagonist who also has magical ability. The ability to fly, control objects with the mind, cast spells, control the elements, see into the future and talk to animals are all magical powers which appear frequently in the genre.
Observe whether the work seems inspired by mythology, folk tales and legend. Many works of fantasy draw on elements of classical Greek mythology or the Arthurian legends. Others incorporate generic tropes from folk tales, such as an abandoned child growing up to become powerful leader or a common individual setting out on a heroic quest.