How can I determine if my files are on the Hard Drive or iCloud?

If you have iCloud Drive and its Desktop and Documents option turned on, it is possible that some of your files may only be on iCloud but that is not necessarily the case. If you go to Finder menu > Settings > Sidebar (at the top of that Settings window), then insure that there is a check in the box in front of your Documents folder. If Desktops and Documents option of iCloud Drive is on, that folder will be in the iCloud section of the sidebar (even though the files may also have a local copy on your Mac). Then when you open a Finder window and click on the Documents folder, Finder will display the contents of that folder regardless of whether the files are on iCloud, stored locally or both.

If you have Apple menu > System Settings > [username] > iCloud > Drive > Optimize Mac Storage turned off then those files will always have a local copy; if Optimize is turned on, there may or may not be a local copy. To verify, see the information in the "View iCloud status" section of Get file, folder, and disk information on Mac - Apple Support

If you want to turn off the Desktop and Documents option of iCloud Drive, see the following from Add your Desktop and Documents files to iCloud Drive - Apple Support

Turn off Desktop and Documents

1. From your Mac, choose Apple menu  > System Settings.
2. Click Apple Account. In macOS Sonoma or earlier, click Apple ID.
3. Click iCloud.
4. Under Saved to iCloud, click Drive. In macOS Sonoma or earlier, under Apps Using iCloud, click iCloud Drive. 
5. Turn off Desktop & Documents Folders.
6. Click Done.

What happens when you turn off Desktop and Documents

When you turn off Desktop & Documents Folders, your files stay in iCloud Drive and a new Desktop and Documents folder is created on your Mac in the home folder. You can move files from iCloud Drive to your Mac as you need them, or select all of your files and drag them to the place you want to keep them.

or if you want to completely turn off iCloud Drive, see the following from that same support document:

What happens when you turn off iCloud Drive or sign out of iCloud

If you turn off iCloud Drive or sign out of iCloud, a new Desktop and Documents folder is created in your home folder. You also have the option to keep a local copy of your files that are in iCloud Drive. If you keep a local copy of your files in iCloud Drive, they're copied to a folder called iCloud Drive (Archive) in your home folder. You can move any files that were in your iCloud Desktop and Documents to your new local Desktop and Documents.

Here's a TIP:

1• Click any Finder window.

2• Then, in the menu bar, click View > Show Path Bar.

Now every Finder window you open will display the path bar at the bottom. The path to the files is displays will be shown including the root, whether that is the Mac itself or iCloud. Often very useful for keeping track of your location within Finder's file hierarchy.

You can also Customize the Finder toolbar to include a Path tool.

Customize the Finder toolbar on Mac - Apple Support

Even if the path bar in Finder shows that it is in iCloud, it may (usually does) have a local copy at that path. To know whether there is a local copy you need to check the iCloud status icon in Finder. See the information in the "View iCloud status" section of Get file, folder, and disk information on Mac - Apple Support

D.I. Johnson wrote:

Here's a TIP:

1• Click any Finder window.

2• Then, in the menu bar, click View > Show Path Bar.

Now every Finder window you open will display the path bar at the bottom. The path to the files is displays will be shown including the root, whether that is the Mac itself or iCloud. Often very useful for keeping track of your location within Finder's file hierarchy.

You can also Customize the Finder toolbar to include a Path tool.

Customize the Finder toolbar on Mac - Apple Support

An example from my Mac shows "iCloud Drive > Documents > Misc > text.docx"

The file shown has both a local copy on my Mac and a copy on iCloud.

All of your files are on your Mac. If you elect to enable iCloud Drive (and desktop & documents) your files sync to the cloud but remain on device. If you elect to optimize storage, then somme files may offload to iCloud only status but only if space is needed on device.

FoxFifth wrote:

[...]

An example from my Mac shows "iCloud Drive > Documents > Misc > text.docx"

The file shown has both a local copy on my Mac and a copy on iCloud.

Yep. 👍🏽

I wanted to include the Path options for the OP as I find this simple tool and info indispensable every day, regardless if I'm looking at a folder on the Desktop or in iCloud. It's just nice, quick, always available display that let's me see what's where I am when I have multiple Finder windows open.

I suppose that's possible.

I myself don't use iCloud to sync my Desktop and Documents, but I do keep discrete files in each location. So when I'm looking for any file, the Path bar in the Finder window does show me if it's local or in iCloud.

This confusion of the OP is an example of why I don't sync these in iCloud. I don't need nor want to have the same file existent in two locations.

Unfortunately it doesn't give any information about whether or not the file is on the local drive.