Preheat oven to 350°F (175°C) and line a 12-cup muffin tin with paper liners.
Whisk together flour, sugar, baking powder, and salt in a large mixing bowl.
Add 0.5 cup softened butter and mix on low speed until the texture resembles coarse crumbs.
Whisk the egg, milk, and 1 tsp vanilla extract together, then gradually incorporate into the flour mixture until smooth.
Fill cupcake liners 2/3 full and bake for 18-20 minutes until a toothpick inserted in the center comes out clean.
Transfer cupcakes to a wire rack to cool completely before decorating.
Prepare buttercream frosting by beating 0.5 cup butter, powdered sugar, 1 tsp vanilla, and heavy cream until light and fluffy.
Apply a generous layer of frosting to each cooled cupcake, creating a slightly domed surface.
Cut marshmallows diagonally and press the cut side into pink sanding sugar to create ears.
Place two marshmallow ears, two candy eyes, and one jelly bean nose onto each cupcake to finish the bunny face.