In a mixing bowl, beat butter, cream cheese, and sugar until light and fluffy. Add the egg and vanilla extract, mixing until combined.
In a separate bowl, whisk together the flour, baking powder, and salt. Gradually add this mixture to the wet ingredients, stirring until a soft dough forms.
Cover the dough and refrigerate for at least 30 minutes. Once chilled, scoop small portions and roll them into balls. Coat each ball in powdered sugar.
Preheat the oven to 350°F (175°C). Place the dough balls on a lined baking sheet, spacing them apart. Bake for 10-12 minutes until edges are set but centers remain soft. Let cool before serving.