Preheat the oven to 350°F with a rack placed in the center of the oven.
In the bowl of an electric mixer, beat the butter until it is creamy. Add the sugar and continue beating until fluffy. Add the egg and beat until it is fully incorporated.
In a separate bowl, whisk together the flour, baking powder, and salt. Stir in the shredded coconut. In a measuring cup, stir in the coconut extract (or vanilla and almond extracts) into the coconut milk. Add the flour mixture in increments to the butter mixture, alternating with the milk. Beat until just combined.
Fill the doughnut pan about 2/3 full. Bake for about 18-20 minutes or until golden brown. Gently remove the doughnuts from the pan.
Make the glaze by stirring together the powdered sugar, lime juice, and coconut milk until smooth.
Dip the doughnuts in the glaze and let the excess drip off, then dip it into the coconut to coat. Let it cool on a wire rack…or enjoy immediately.
Coconut in this recipe: If you can't find fine macaroon coconut, you can give your shredded coconut a few blitzes in a food processor for a finer texture. But you can definitely skip this step for a chewy, coconutty texture.
Should I use sweetened or unsweetened coconut? I've used both! I love using unsweetened coconut for a less sweet breakfast doughnut, but if I want the doughnut to be sweeter and more dessert-like, then I use sweetened coconut.
Don't have coconut extract? Not to worry. Use a combination of almond and vanilla extracts.