Preheat the oven to 350°F. Line a 12-cup muffin pan with cupcake liners (these are my favorite) and set aside.
In a medium bowl, add the all purpose flour, baking powder, and salt. Whisk to combine and set aside.
In a large bowl, add the butter. Beat the butter on high using a handheld or stand mixer fitted with a whisk attachment until smooth.
Add the sugar and beat for 2 more minutes, scraping down the sides of the bowl as needed, until the butter and sugar have fully combined.
Add the eggs, milk, lime zest, lime juice, and tequila. Beat for 30 seconds until combined.
With the mixer on low, slowly add in the dry ingredients. Mix together until just combined.
Evenly pour or spoon the batter into the liners so that they're 2/3 full. Bake for 20-22 minutes, or until a toothpick inserted into the center comes out clean.
Remove the cupcakes from the oven and allow them to cool completely before frosting.
In a large bowl, add the butter and cream cheese. Beat on high using a handheld or stand mixer fitted with a whisk attachment until smooth.
Add the vanilla extract, lime zest, lime juice, and salt. Beat for 30 seconds to combine.
Add the confectioners' sugar and beat until the frosting is smooth and thick.
Cover and refrigerate until ready to use.
Notes
Tequila: You can use any type of tequila that you prefer. I used an añejo variety, but blanco or reposado also work.Alcohol-Free: You can also make this recipe without any alcohol if you prefer! Simply use 1 tablespoon of milk instead of the tequila.