Getting good sound from MacBook via DAC.

You aren't doing anything wrong, iTunes sound quality sucks, as mentioned the power supply on your mac doesn't help, spinning discs in your computer add noise,and it all adds up to not great sound. You can go a few routes, and all is far from lost...
FWIW, I did the same as you many years ago and learned from all the pain. I replaced mac with dedicated mini for music server, used all the major software(e.g. Audirvana+, Amarra, etc.), added USB isolators/filters, etc. 
The best route by far IMHE, and agreed with by many on computeraudiophile is to store your files on a NAS in another room, run ethernet into your audio room and use a dedicated single purpose renderer/streamer to bring your files to your DAC from the NAS via the ethernet cable. Read the Sonore microRendu review by Chris Connaker on CA (product of the year) and you will understand. Other products like Aurelic Aries and their Mini, Bluesound, Aurenders(at higher price points), and Melco all head in this direction although some focus more on internal storage than taking full advantage of an isolated NAS). 
There are plenty of threads describing how many here have switched away from PC & mac based solutions and got happier.
Cheers,
Spencer

Ran a MacBook Air via USB out to a Gungnir DAC for a good long while. Listened to ripped CDs from external hard drive and also to Spotify from the MBA. I was very happy with the sound. Sounded better than direct from the CDP. But then, maybe I’m not a true audiophile (though the improvement over the CDP was confirmed by a gust who owns some very fine gear).

A couple of things I believe helped the sound: 1) Installed BitPerfect on the MBA to be the "music server" instead of iTunes. $10 from the App Store. It accesses the iTunes files but in Hog Mode it keeps iTunes from mucking around. Better sound with BF than without (i.e., letting iTunes run things). Just be sure to follow the set up instructions. It’s not hard and the folk(s) at BP are very responsive and helpful.   There are a number of other pricier/more feature-laden music services.  Pick your poison.  2) Ran USB out from the MBA to a V-Link 192 USB/SPDIF converter.  SPDIF from the V-Link to the DAC. Had a double headed USB cable so power to the V-Link was from an external source and not from the MBA. Things sounded very good to my ears.

Another thing I believe helped was that the MBA itself ran from a solid state drive and NOT from an internal hard drive. Seemed like SSD makes for a very quiet setup.   V-Link 192 not made anymore but there are other USB/SPDIF converters.  I'd look at something from iFi were I buying new today.  Still using the V-Link with the Auralic Aries Mini that has replaced use of the MBA.  It made a huge difference with the Aries Mini.  

Good luck.

Good stuff, thank you all for chiming in on this. !   

@jetmek

I’m thinking it has to do with the music file format in Itunes but Im not sure.

It does make a difference it you’re comparing playing a CD and comparing the sound quality to the same album purchased and downloaded through iTunes.

Make sure you’re comparing apples to apples, so to speak. That the file you’re playing through iTunes is a lossless rip from the same CD.

I can easily detect the difference between a lossless rip from CD and a 256kbps track (or rip) from iTunes. I’m only so-so and distinguishing at being able to distinguish a 320kbps rip from a lossless CD rip.

Good luck.

iTunes could be the problem. I use Audirvana Plus on a MacBook Air and get excellent results. See my previous post on this subject.