It's is short for it is or it has; its shows that something belongs to it. If you can replace the word with it is or it has and the sentence still makes sense, write it's. If not, write its.
Few short words cause as many problems in writing as its and it's. They sound exactly the same, and only an apostrophe separates them. To make matters worse, its is one of the most common words in English. English has many confusing words that are spelled and pronounced alike, and this guide explains the rule for these two.
Possessive vs. contraction
The best way to keep the two words apart is to understand what each one is. It's is a contraction of it is or it has, while its is the possessive form of it.
That is exactly what makes it confusing, because many possessive forms do have an apostrophe, as in Hector's dog. However, its is a possessive pronoun (some grammars call it a possessive determiner), and like the other possessive forms of the personal pronouns, his, hers, ours, yours, and theirs, it is written without an apostrophe. You can read more in understanding possessive adjectives and pronouns.
The mechanic needs to fix my car. Its back wheel just fell off.
For more rules like this one, see these six important grammar rules you need to know.
The easy it's vs. its test
To remember which of the two words to use, keep in mind that it's is simply a contraction of it is or it has. It works just like she's (she is), what's (what is), and how's (how is).
Whenever you are in doubt, try it is or it has in the sentence:
I am voting in this election. It is very important to do so.
I am voting in this election. It's very important to do so.
Both of these sentences are correct. With its, however, the second sentence would be wrong:
I am voting in this election. Its very important to do so.
The same test tells you when to use its. Here is a correct sentence:
The meal from yesterday was delicious. Reheating it did not make it lose its taste.
If you replace its with it is, the sentence no longer makes sense:
The meal from yesterday was delicious. Reheating it did not make it lose it is taste.
Here is another example:
America is famous for its film industry and music.
America is famous for it is film industry and music.
The second sentence is clearly wrong, so the first one, with its, is right.
One final rule to remember
There is one more rule to keep in mind: its', with the apostrophe after the s, is always wrong. Never write it. This is one of the few English grammar rules where you can safely say "never".
To learn more about the little mark that causes all this trouble, read how to use apostrophes correctly or look up the apostrophe.
Its and it's look almost identical, but once you break them down, you can see which one you need. Keep the it is test in mind whenever you are unsure. And because the two are homophones, real words that sound alike, a check against a dictionary alone may not catch a mix-up: the AI Spell Checker reads the whole sentence and also catches a real word in the wrong place.