Best DAC for under $500

Do a search on the EVS millennium DAC 1. It would be in your budget.

A modified ART DIO - Outstanding!

I second the EVS if you can find one. No matter the brand, you'll be better off buying used in that price range (or have a cheap one modified, like Jeffga suggests).

Also highly recommended in used, if you can find one: Muse Model 2+ DAC. It will likely be a bit more than $500, but make sure to get the plus version which is HDCD compatible and outperforms the straight model 2 (not a bad DAC either I'm told, and can be had for less than $500 used). Disclaimer: I am currently selling my Muse rig to raise some money, but am not splitting it up so this is not quite as self-serving as it sounds! It is an outstanding rig in both my systems.

Marco

I'll third the EVS Millennium DAC. Top notch parts quality and implementation at a ridiculously low price. Transparency and dynamics in spades. Disclaimer: I've got one but won't sell it, so this isn't self-serving at all. Best of luck.