How to choose a DAC?

I'm setting up a music server with my new MAC Book Pro, an Audio Refinement System with JM Labs speakers. I will be using Lossless storage format. I have a discriminating ear and am needing help to know how to differentiate between a $400 DAC and a $4000 DAC? My budget is less than $1,000. Any suggestions

I'd suggest auditioning what is currently reputed for excellent jitter immunity and then pick what you prefer the sound of.
I'd suggest you not worry about anything over $1,000 =)

Beyond the sound there are a lot of different features which contribute to price.

DACs come with a number of different inputs - I2S, USB, Toslink, AES/EBU and SPDIF - often some combination. My preference coming off the Mac is USB - if for no other reason then it will cost you a lot less for an excellent cable...

If you want to play SACDs and such you might want an Oppo or other transport in which case you'll need an input for it as well.

When it comes to output, there are two kinds of DACs - NOS, meaning non oversampling which will only play Redbook at its native 16/44.1; and oversampling DACs that will increase the resolution, usually to 96 or 192. This is an area of some controversy - there are diehard advocates in both camps so you'll have to listen to know. (Some DACs are switchable between NOS and OS)

Complicating this is that some DACs are capable of dealing with the newer high rez sources like 24/96. This is a pretty niche thing right now - your interest will depend considerably on your musical taste - great for classical buffs, almost no content available for most other genre.

There are also some DACs that are balanced. Those with an AES/EBU input are balanced but you have no way I can think of to generate that from a Mac. Also some DACs have balanced outputs (XLRs). If your preamp has balanced inputs this is a nice feature.

When it comes to circuit design, there are DACs that are entirely solid state. There are some that are hybrid where a tube or two is used in one position of the circuit. And though I can't think of one offhand, I am sure there are all tube dacs. Each solution will color the sound in some way.

While it is true that bits are bits, different DAC chips each have their own sound. And then you've got all the related stuff like power supply, parts quality, circuit design etc.

The main thing of course is how the units sound. I wouldn't focus on jitter because by definition a DAC with a lot of jitter is going to sound crappy.

I suppose at the end of the day what makes one worth 10 times the other comes down to: innovative engineering, external aesthetics, a particular feature set, great sound and great resale.

If I had your budget, I would look at the current crop of DACs from Taiwan: Keces, Valab, Paradisea. Each has their strengths and you can buy any of them brand new for well under your budget.

There are also a ton of good used DACs available here on the Gon on a regular basis. For US product I would look at the Benchmark and the Apogee - you'll have to buy the Benchmark used if you want USB. For Brit kit I would look for a Musical Fidelity TriVista which you can find used for right around a grand.

I am sure that other posters will each make their own contributions.

One last thought - most DACs are very sensitive to power and power cables. And you will want to use a very good set of interconnects to keep all the performance you spent all this time looking for. I have also found many of them are sensitive to isolation tweaks and do well with a bit of massloading. I mention this because this stuff can add up fast.
Ckorody's input is well thought out; I agree that auditioning is the best way to choose. In my few auditions, I have so far been quite happy with PS Audio's DLIII and its feature set. And so far the sound continues to improve over time. I have the stock unit, with no mods. I paid 15% under retail. I think with your Mac, you will be very pleased with the results of a good dac in the stream.
The main thing of course is how the units sound. I wouldn't focus on jitter because by definition a DAC with a lot of jitter is going to sound crappy.

Agreed. A jittery DAC will sound crap.

However, you need to be aware that some DAC's require a clean low jitter incoming signal whilst others can handle large amounts of incoming jitter on the digital interface. In practice this means that a nice sounding DAC with poor jitter rejection may require a reclocker to perform optimally.
For a grand go for a PS Audio,Benchmark,Wavelength Brick.For 5-750$ theres about 5-6 good ones,For 1750$ theres the Bel Canto.YMMV,good luck,Bob
My humble thanks to the experts who have responded. Its been an education for me for sure. I've learned about features, benefits, cables, inputs and outputs and have some recommendations that I will now go looking for on the sight. Always exciting to go shopping!