How do I know when I can let my baby "cry it out"?

Have a mommy list. After birth babies learn to express their desire for "change" by crying. They look to their source people to fix things. Make a "mommy list" of all those things you can fix:too hot, too cold, hungry, poopy, wet, laying in spit up, etc. However, if tired or overly tired, you can't fix it. Create a soothing area for them to drift into sleep&help them settle but letting a tired baby cry is ok from day 1.
Trial and error. "crying it out" to teach your baby to sleep through the night should only be used after about 3-4 months. Before this age your baby is generally crying because they have a wet diaper, they are hungry or something else is wrong. Babies are also waking up multiple times a night to feed before 3/4 months. After this time you can try this method and see if it works for you and your family.