Here's the rules as I follow them:
1. Group the dialog.
2. Group the action; try not to interrupt the natural flow of conversation.
3. Keep the tags to a minimum.
4. Don't let tagless conversation go longer than 4 lines.
5. Keep the character voices unique.
When I read, my eyes slide over the tags. Most of the time, I know who is talking by context and voice. In the passage below, I set the set the stage with some description and action, and at the end, I add some internal commentary to solidify the scene in the reader's mind.
In the middle, the dialog speaks for itself.
Rising to my feet, I face her. Her bald head, freckles, and dark eyes--it's like looking in a mirror. But she wears the blue uniform of an elite soldier. I wear the white scrubs of a patient. Jadon folds her arms across her chest; lips press together; chin juts out. Not one emotion flickers across her face as she studies me.
Fidgeting, I glance away. “The dragon told me to.”
“That’s what you told me last time.”
“I had to come.”
“Father will kill you if he finds out.” If her face wasn’t made of stone, she would be frowning at me.
But I know she is right. Favorite project or not, he won’t let me live if he can’t control me. Should I be afraid? Could death be any worse than living here, in the army’s barracks? Or am I already dead? I’m not really sure. I could be.