British usage is often the opposite of American, so this post addresses American accepted usage only.
Confused about how to punctuate quotations? The basic rule is: Quotation marks must be used in pairs, open-ended and close-ended–except when the quotation continues in an additional paragraph, in which case the ending double quotation marks are left off the preceding paragraph–and quotes within the quotation are set off by a pair of single quotation marks.
But what about the other punctuation? How do you know where to place a terminal mark within a quotation?
For example, what if the primary quotation is a question but the quote-within is declarative? Where does the question mark go? Here are examples to guide you.
“Don’t be ridiculous!” Heather stormed into the parlor. “How can you stand there and say ‘Heather isn’t well’ when I’m standing here as fit as a fiddle?”
“How can you be so ridiculous as to say ‘Heather is ill’?” Heather asked.
“‘Heather is ill,’ you say? Preposterous.”
Internal dialogue requires no formatting and no quotation marks unless you change to present tense, first person.
Well, she’d show him a thing or two.
~or~
Well, I’ll show him a thing or two.
Internal dialogue doesn’t take a tag with italics:
WRONG: Well, I’ll show him a thing or two, she thought.
BETTER: She thought she’d show him a thing or two.
PREFERRED: Well, I’ll show him a thing or two.
~or~ She’d show him a thing or two.
Finally, what about interrupted speech? Use the em dash only. No other punctuation (other than quotation marks) is needed. Examples:
“What I’m trying to say is–”
“You’re trying to tell me how to live my life.”
“I need you to take a look”–he handed her the photographs–”and see if you recognize anyone.”
Don’t be afraid to write dialogue. Readers love it. It picks up the story’s pace and provides plenty of “white space.” It’s easy on the eyes. Just be certain you punctuate correctly to avoid confusion.

