In a large mixing bowl, cream together softened butter, cream cheese, and granulated sugar until light and fluffy, about 5-7 minutes.

Mix in the egg yolk and both extracts until well combined.

In a separate bowl, whisk together all-purpose flour, salt, and baking soda.

Gradually blend the dry mixture into the creamed mixture until a soft dough forms.

Wrap the cookie dough in plastic wrap and refrigerate for at least 3 hours.

Preheat your oven to 375°F (190°C).

Roll out the chilled cookie dough to approximately 1/8-inch thickness.

Use a 2-1/2-inch cookie cutter to cut out shapes.

Bake the cookies for 8-10 minutes until edges are golden.

Cool cookies on baking sheets for 2 minutes, then transfer to wire racks.

Once cooled, decorate with frosting or colored sugar.