Some people have a global preference for using the first person or third person in their works of fiction, but for others, it’s a fresh decision every time. How do you decide when you aren’t sure which you want to use?
Character Building
When you write in the first person, your protagonist’s choices of words and the things that she finds worth mentioning help to build the character. A character can also comment on the events in the story as they unfold, in a way that might be awkward in third person. This can be particularly valuable when the story is driven more by an exploration of characters than by an intricate plot. Can you imagine “Catcher in the Rye” without Holden’s commentary and extensive pet peeves?
Point Of View
Many people find it easier to switch back and forth between points of view when using the third person, and certainly, if you want to be omniscient, third person makes a lot more sense. Hopping between characters can be done in first person narratives, but you have to develop a distinct style for each one to avoid confusing readers. Some stories, such as “The Color Purple”, are told through letters that the characters write to each other.
Situation
Some situations make it hard to suspend disbelief with a first person narrative. If a character zips through an action packed story without a lot of time to sit down and reflect, then dies, when would they have time to tell the story? One solution is to let her speak from the afterlife. Alice Sebold’s book, “The Lovely Bones”, is a great example of a first person narrative using a deceased character; the first event in the book is the protagonist’s death, and she tells the rest of the story from heaven.
It may also feel awkward to use the protagonist’s voice to discuss facts that such a character would not realistically share with anyone, such as information that could lead to disastrous consequences for a loved one. Alternately, there may be a very clear motive for the character to tell his story. Eg. Dean Koontz’s “Odd Thomas” was badgered into writing a novel by his friend.
Pronouns
This one is listed last because it’s probably the most trivial consideration: having first person pronouns to distinguish your protagonist from other characters of the same sex can make it easier to write unambiguous sentences without having to use the characters’ names every time. You could write “He spit on my fries, and I squirted him with ketchup,” instead of “Bob spit on Doug’s fries, and Doug squirted him with ketchup.”