In a medium-sized bowl, whisk together the flour, baking powder, and salt. Set aside.
In a medium-sized bowl with a hand mixer or in the bowl of a stand mixer with a paddle attachment, cream the butter and sugar together until light and fluffy, about 2-3 minutes. Add in the egg and extracts and continue to mix on low speed until combined. Make sure to scrape down the sides of the bowl as needed, making sure everything is incorporated.
Slowly add in the flour mixture and beat on low. The dough will be soft, but if it looks too sticky add in about a tablespoon of flour.
If you are freezing the dough, split the dough into two equal discs and wrap it in plastic wrap. If you are going to use the dough immediately, roll it out on a floured surface using a rolling pin. You want the dough the be thin, but not paper-thin. About 1/4 inch thick. When the dough is ready, place it on a cookie sheet with parchment. Continue with the remaining dough. Stack the pieces of dough on top of each other and place in the refrigerator for 1-2 hours to chill.
When the dough is just about ready to go, preheat the oven to 350 and prepare a sheet pan with parchment.
On a floured surface, start to cut out the dough using cookie cutters of your choice. Re-roll the extra dough and continue to cut out different shapes. If the dough starts to get soft at any point, place it back in the refrigerator for a few minutes to set.
Bake the cookies for about 8-10 minutes, or until golden brown. Let cool completely before decorating.
For the royal icing, mix together the powdered sugar, meringue powder, and water in a medium-sized bowl or in the stand mixer using the whisk attachment. Beat everything together for about 1-2 minutes. You want the icing to have a smooth, but thick consistency. It should drop down smoothly from the whisk when ready to use. Add in more water if it is too thick or more powdered sugar if it is too thin.
The icing will take about 2 hours to completely dry. Let the icing dry on the cookies before doing multiple layers. You can put the cookies with the icing in the refrigerator to speed up the drying process if needed.
Extra cookies can be frozen and kept in the freezer for 3 months.