I've heard several writers say that dialogue is hard, possibly one of the most challenging parts of writing. This baffles me, because I LOVE writing dialogue. Sometimes I have to scold myself and pull in the instinct to make my novels entirely dialogue. Seriously, if I could, I'd write 99% of my stories through dialogue and that just doesn't work, does it?
Actually....No, you can't, Renee. Just stop.
I don't know what makes dialogue easy for one person and a bitch for another. I doubt that I could explain how I know what will sound ridiculous and what will sound natural. When I'm writing I'm able to play it through my head as I write. When editing, I can pick up dialogue problems rather easily. Now, narrative is another matter entirely. I miss things that should be blinking at me like a neon sign.
Anyway, I thought I'd share some of my tricks, things I'm aware I do in order to create natural dialogue that flows easily for the reader and enables her to slip into my characters' worlds a little more.
1. Limit your tags and attributions.
To me, this is not just a fad in the industry at the moment. As a reader I find the fewer tags I see, the easier it is to get lost in the story and the characters. Use only what is absolutely necessary to make it clear who is talking and utilize action to show as much as possible to avoid talking heads. For example, after about four lines, perhaps character A shoves character B. He doesn't say and shove, just shoves. "You're an ass!" Joe shoved Bill. (not "Joe said and shoved Bill")
2. Use slang and dialects sparingly.
Real people use slang. Real people speak with an accent. But when you go overboard, it becomes an exercise in translation rather than an enjoyable read. Don't write everything the way it sounds, because the reader must pause to recognize what you're doing. Instead, pepper it through lightly, which gives the 'feeling' of real dialogue, while still leaving the reader's brain stress-free.
Dialect...it's really tough to write a novel where every character shares a certain dialect. No, not tough to write, tough to read. I have a character who speaks with a heavy 'backwoods' dialect, but rather than write the dialogue exactly as it sounds, I utilize grammatical errors instead of spelling things wrong. How?
"He don't know nothing. Christ, his panties get all bunched when the wind blows crossways. Can't judge a problem by his blustering."
The speech is a grammatical nightmare, but gives the character a distinct speech pattern without resorting to "He don' know nothin'. Christ, his pannies git all bunched when de win blows crosswhys. Can't judge a prollem by his blusterin'." See the difference?
3. The best way to write natural dialogue. Listen. Wherever you go pause and listen to how others speak. When you're watching television or movies, pay attention to word usage, pauses, emphasis, and tone. You'll notice a lot of things that you might overlook when trying to rely on just your memory. Everyone has little quirks in their speech. I have trouble saying "caterpillar" and "vinegar", for example. Just a thing. What? Stop judging me. If you're writing a character who is younger, go to an area where kids that age are playing. You want to watch them while they're relaxed and speaking naturally to pick up on little details many writers miss. Er, don't be creepy about it. Go to a park with a friend, a restaurant, or something like that. Don't follow them around. That's weird. People don't like it. If you listen carefully to children, they have a rhythm of speech that is very different from a teenager or an adult. It can help make the dialogue more authentic to become familiar with this rhythm. While you're listening, watch. Mannerisms, facial expressions, etc. all play a role in dialogue.
So, that's what I do in addition to 'just writing' dialogue. How about you? Any tips?

My kids do the same thing. When they read out loud to me, they skip the tag--sometimes altogether but other times they tack it on at the end. They have no clue that they've just proven your point.
Tip #4: Don't interrupt dialog with unneccessary descriptions, explanations, or internal dialog.
Imagine this...
Husband: What's for dinner?
Wife thinks about all the things she still has to do to get the family ready for vacation tomorrow. The laundry, the packing, the phone calls, and figuring out who will feed the cat.
Wife: Get it yourself.
By the time she answers him, the reader has forgotten about the husband's question and wonders why the wife says this.