Cream butter and cream cheese until smooth. Add flour until dough pulls away from the sides of the bowl. Refrigerate for 1 hour.
On a lightly floured surface, roll dough 3/4-inch thick. Cut out 1 1/2-inch rounds with a cookie cutter. Gather dough scraps, reroll, and cut out a second round of cookies. Discard any leftover dough (do not overwork dough).
Place cookies on an ungreased baking sheet, 2 inches apart. Using the back of a 1/2 teaspoon, make a dent in the center of each cookie. Scoop 1/2 teaspoon of preserves into each dent.
Bake for 7-10 minutes, or until cookie bottoms begin to brown.
Allow to cool completely; sprinkle with powdered sugar before serving.