Dialog Tags: When to Use

The noble dialog tag, always there to let your reader know who is speaking. "What do you want?" Jane said. 

Without tags, dialog can become a confusing jumble. But unfortunately, too many tags will render your dialog cluttered and annoying to read.  So how many is too many? Any more than the absolute minimum that is required for clarity.  Have some friends read through your dialog and highlight any spot where they were confused about who is speaking. If they were never confused, see if you can take a few tags out without causing confusion. Your goal should always be the smallest amount of tags that you can get away with.

If only two characters are conversing, you can usually skip quite a few tags without causing confusion, because of the back-and-forth pattern of conversation:

"When did you buy a porcupine?" Earl asked.

"Never said I bought it," Leo replied.

"What? You said you weren't going to steal any more!"

"Never said I stole it, neither."

Though the last two lines of this example had no tags, it was still clear who was speaking; Earl spoke first, so it was clear that he was speaking again after Leo. The final line was clearly Leo's, since he replied to Earl and there are only two characters in the scene.

If you have three or more characters in the scene, tags become more and more necessary to keep things clear—the more characters you have, the more tags you'll need.

For more tips on avoiding dialog tags, check out this post.