So, how do you tell if a story is Paranormal or Urban Fantasy? Well, I took a little poll of the writers I know and most of them seem to agree the difference is MAGIC. If the story contains magical elements, it’s an Urban Fantasy. If it doesn’t, it’s Paranormal.
Going by this, stories like Twilight and Vampire Academy would be Paranormal. There are vampires in both and in Twilight especially, some of the vampires have special talents (Edward reading minds, Alice seeing the future) but these talents aren’t really ‘magical.’ Now, the opposite could be argued if you view those elements as magical – in that case, this book could be and has been classified as UF…and this is exactly why this genre is a pain for me :D. But for me, those elements are not magical and I would therefore classify Twilight as a paranormal.
Stories like Wicked Lovely and the House of Night series (Marked, Hunted, etc) would be Urban Fantasy. Because in these books, there are magical elements with the fairy glamour and magic and in the House of Night series, the vampires do some mystical magical stuff with the five elements and their ‘talents.’
Keep in mind, these definitions and tests are what I do and how I differentiate. As with many things in this business, there are few hard and fast rules. I’m sure there are others who do it differently and would disagree with my classifications, but for me, this is what works :)