Preheat your oven to 350°F (175°C).

In a medium bowl, mix the softened cream cheese, ¼ cup of granulated sugar, and 1 teaspoon of vanilla extract until smooth and creamy.

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

In a large mixing bowl, beat the softened butter until fluffy. Gradually add the ¾ cup granulated sugar and ½ cup brown sugar, mixing until well combined.

Add the large egg and remaining 2 teaspoons of vanilla extract, mixing until fully incorporated.

Gradually incorporate the dry ingredients into the wet mixture until just combined.

Take about a tablespoon of the cookie dough and flatten it in your hand. Place a teaspoon of the cream cheese filling in the center and wrap the dough around it, shaping it into a ball.

Optional: Roll the cookie ball in granulated sugar before placing it on a lined baking sheet.

Bake for 10-12 minutes until the edges are golden brown, and the centers remain soft.

Allow the cookies to cool on the baking sheet for a few minutes before transferring them to a wire rack.

Drizzle caramel sauce over the cookies before serving.