Always dither to the bit-depth you need. Any higher, and you end up chopping off bits. Any lower, and you're throwing away extra resolution. And if you're making your music available in hi-res format, you probably want to dither an extra copy to 24-bit, not 16-bit, to preserve that extra resolution.

Where do you put dither?

The simplest way to look at it is that you should always dither when going down in bit-depth. So, if you're going from 24-bit to 16-bit, you should dither. If you're going from 32-bit fixed point (not floating point) to 24- or 16-bit, you should dither.

When should you apply dither?

Quick Answer. Dithering is the process of adding noise to a signal, in an effort to mask and randomize higher-order harmonics, and in turn, make quantization distortion less perceivable. Dithering should only be used during the mastering process, and only when the bit depth of a signal is being reduced.