Preheat oven to 350°F (175°C). Line baking sheet.
Cream butter and cream cheese until light and fluffy.
Add sugar, beat until smooth.
Mix in egg, lemon zest, juice, and vanilla.
In another bowl, mix flour, baking powder, soda, and salt.
Gradually add dry ingredients to wet mixture.
Fold in shredded coconut with a spatula.
Scoop tablespoon-size dough onto the baking sheet.
Bake for 12-14 minutes, until edges turn golden.
Cool cookies on rack. Dust with powdered sugar if desired.