Preheat oven to 350 degrees F. Line a cupcake tin with liners.

Boil the water. Stir the 2 tsp instant espresso powder into the boiled water and set aside

In a large bowl, mix together well the sugar, cocoa powder, flour, baking powder, baking soda, and salt. Then Add in the egg, oil, 1 tsp vanilla, espresso water, and milk. Beat together very well for a couple of minutes, either using an electric mixer or a wooden spoon.

Pour the the batter into the prepared cupcake tin and bake for about 25 minutes.

Let the cupcakes cool and make the frosting: with an electric mixer, whip the butter and cream cheese on med-high for a couple of minutes until light and fluffy then mix in the espresso powder, Kaluha and vanilla extract, into the whipped butter-cream cheese mixture.

Gradually mix in the icing sugar and whip for 1-2 minutes until shiny.

After the cupcakes have cooled: poke holes in the top of each cupcake with a fork. Drizzle about 1/2 tsp Kahlua into the holes in each cupcake and frost.