Preheat the oven to 350°F. Line a muffin pan with paper liners and set aside.
In a large bowl, cream together the 1/2 cup of butter with the white sugar until light and fluffy. Add in the eggs one at a time, beating together until fully incorporated. Mix in the vanilla extract.
In a separate bowl, mix together the flour, baking powder and nutmeg. Slowly mix in the dry ingredients to the wet ingredients until fully incorporated. Add in the eggnog and mix until fully combined.
Scoop the batter evenly into the prepared muffin pan. Place in the preheated oven and bake for 20-22 minutes, or until a toothpick inserted into the centre comes out clean.
Frosting: Meanwhile, cream together the 4 oz butter and cream cheese until light and fluffy. Add in the icing sugar and vanilla, and beat until fully combined. Add in enough food coloring until you reach your desired color.
When the cupcakes are cooled, fill a piping bag (or a ziplock bag with a hole cut out in the corner) and pipe the frosting on the cupcakes.