What is the maximum depth of subchapters one should use in a paper? I have a tendency to overcategorize things when writing a paper. Currently I’m working on my thesis and I’m concerned with my level of subchaptering. Right now I’m already down to x.x.x.x and I fear going down a level deeper would look bad. I think it adds to the overall clarity of the paper to categorize everything and would allow for more efficient lookup later on, but it’s not clear to me to what degree this should be done. Are there any general best practices? Are there any rules of thumb you use?

My faculty does not have any clear policy regarding this.
Many, if not most, journals specify a maximum of three levels. In a book where the chapter is the top level, four may be ok considering each chapter can be as extensive as a paper. The problem of having too many levels is that the headings disrupt the reading. A good sign of this is when you end up having one heading per paragraph. If that is the case, you can probably remove the lowest level of headings and try to make the resulting segments of text flow by inserting bridges that makes paragraphs into a coherent text.

In my experience having read numerous student reports, theses and articles, three is a good goal. It is rare that a fourth level adds much in terms of structure apart from perhaps helping the writer. In fact, I often recommend students to keep a more detailed list of headings to enable them to see the structure of what they are writing but under the pretext that only a maximum of three should remain in their final version. I stand by that recommendation.