Preheat your oven to 350°F. Line a 12-cup muffin tin with paper liners.

Finely chop the shredded coconut and set aside.

Melt the butter in a large microwave-safe bowl, then let it cool for 5 minutes.

In a medium bowl, whisk together the flour and baking soda. Set aside.

To the cooled butter, add the granulated sugar, vanilla extract, and coconut extract. Whisk until combined. Beat in the eggs one at a time, mixing well after each addition.

Add half of the flour mixture to the wet ingredients and stir until just combined. Pour in half of the coconut milk and mix until almost incorporated. Repeat with the remaining flour and coconut milk, then stir until you have a smooth batter.

Fold the chopped shredded coconut into the batter.

Fill each cupcake liner about halfway full. Avoid overfilling to prevent muffin tops.

Bake for 15 to 17 minutes, or until a toothpick inserted in the center comes out clean. Let the cupcakes cool in the pan for 5 minutes, then transfer to a wire rack to cool completely before frosting.

Zest the key limes, taking care to avoid the white pith. Juice the limes and set both aside.

In a large bowl with a hand mixer or in the bowl of a stand mixer fitted with the paddle attachment, beat the softened butter and cream cheese on medium-high speed until smooth and creamy.

Add the key lime zest, key lime juice, salt, and 1 cup of powdered sugar. Beat on low speed until the sugar is incorporated, then increase to high and beat until fluffy. Repeat with the remaining powdered sugar, adding one cup at a time and scraping down the bowl as needed.

Once all the sugar is added, beat the frosting on high speed for 1 to 2 minutes until light and airy.

Frost the cooled cupcakes as desired. Enjoy immediately or refrigerate.