Consider using first person if:
- Narrative voice is very important in your genre (YA, chick lit, urban fantasy)
- You need to conceal information from your reader (mystery, unreliable narrator)
- Your narrator character is likely to be present for all the major events in your story
- Your narrator character is someone who is likely to be willing to share the information you need to convey
Consider using third person if:
- There are multiple perspectives you want to cover
- Your story spans multiple locations, with different characters in each location
- There’s simultaneous action going on, so that no one person could be in on all the action
- You want to build suspense by letting readers and some characters know something that another viewpoint character doesn’t know
- You want to get really deep into a character’s head, letting the reader know things the character probably wouldn’t tell anyone
You can always experiment by writing a scene in third person, then going back and changing the pronouns and then figuring out what else needs to change in the switch to first person. Or vice versa. Which works best for this story? Which is more fun or easier for you to write?
There are also ways to mix it up. A lot of “new adult” books use first person for the heroine’s perspective and third person for other characters. Two (or more) characters might switch off in first-person narration (just be sure to label clearly when you switch voices). You can intersperse letters/texts/e-mails/journal entries to add some first-person narration to a third-person story.
The important thing is that you convey the information the reader needs to know and that the reader is clear on whose perspective the story is in at any given time — unless it’s part of the story that the narrator is a mysterious figure.