In a medium-sized saucepan over medium heat, mix butter, evaporated milk and two cups of sugar.
Heat and stir until sugar dissolves. Do not allow to come to a boil.
Once sugar dissolves, reduce heat to low.
In a small cast iron skillet on medium-low heat, melt the remaining half cup of sugar – stirring constantly until liquid and brown. (The sugar will crystallize about halfway through the process. Just keep stirring until it completely melts.)
Pour the browned sugar into the saucepan and quickly stir to incorporate. (It will bubble and steam. This is totally normal.)
Stir regularly until the liquid reaches the soft ball stage, 235 F (113 C). It’s easiest to check for the soft ball stage with a candy thermometer (the caramel should be about 235 F). If you don’t have a candy thermometer, you can test by dropping a small amount of caramel into water to see if it forms a soft ball (hence the name). It may take up to thirty minutes to reach the soft ball stage. Here’s where the patience kicks in. Resist the temptation to turn up the heat because the caramel can easily burn.
Remove from the heat and stir in the vanilla.
Wait ten to fifteen minutes and then dip, spread, or pour on your favorite baked goods.
Once the icing is on your baked goods, wait three to four hours for it to harden completely.
Notes
Do not expect this recipe to produce a flowy/chewy caramel such as one you would find in a candy bar or a caramel apple. This is meant for frosting cakes and cupcakes and the icing is a little crunchy (gritty) on the outside but soft and smooth when you bite into it.If the icing becomes too hard, you can reheat it by putting it back on the stove and heating it at medium-low heat, stirring until it is melted again. If you are making it ahead of time, you can leave it at room temperature until ready to use (I would leave it out for several days, but I'm not a food saftey specialist). Then, warm on medium-low heat in a saucepan, stirring until smooth before using.This recipe produces enough caramel to frost 24 cupcakes or a two layer 8" round cake.