Beat butter with an electric mixer on medium-high speed until light and fluffy. Gradually add sugar and continue beating until well combined and fluffy. Reduce speed to medium and slowly add egg and egg whites until just blended.
Reduce speed to low and slowly add half the flour mixture; mix until just blended. Add the milk mixture; mix until just blended. Slowly add remaining flour mixture, scraping down sides of the bowl with a spatula until just blended.
Divide batter evenly among prepared muffin cups. Bake until tops are just dry to the touch, 20 to 25 minutes. Transfer muffin tin to a wire rack and let cupcakes cool completely in tin before icing.
To prepare frosting, beat butter and cream cheese together using an electric mixer. Beat in powdered sugar and jam. Frost tops of cupcakes.