Proof the yeast: Warm 3/4 cup milk until it’s just warm to the touch (about 105–110°F).
Stir in 1 tablespoon sugar and the yeast. Let it sit for 5–10 minutes, until foamy. If it doesn’t foam, start over with fresh yeast.
Make the dough: In a bowl, whisk 2 cups flour, 3 tablespoons sugar, and 1/2 teaspoon salt.
In a separate bowl, whisk the egg, 3 tablespoons melted butter, and 1 teaspoon vanilla. Add the yeast mixture and wet ingredients to the dry ingredients and stir until a shaggy dough forms.
Knead: Turn the dough onto a lightly floured surface and knead for 5–7 minutes, adding small amounts of the remaining flour as needed. The dough should be soft, smooth, and slightly tacky but not sticky.
First rise: Place the dough in a greased bowl, cover, and let it rise in a warm spot until doubled, about 45–60 minutes.
Shape the donuts: Punch down the dough and roll it to about 1/2-inch thickness.
Cut out rounds with a 3-inch cutter and a small cutter for the holes. Gently reroll scraps and repeat.
Second rise: Place shaped donuts on small squares of parchment or a floured surface. Cover lightly and let rise 20–30 minutes, until puffy.
Preheat the air fryer: Heat your air fryer to 350°F (175°C) for 3–5 minutes.
Lightly spray or brush the basket with oil if it tends to stick.
Brush with butter: Brush the tops of the risen donuts lightly with melted butter. This encourages browning and gives flavor.
Air fry: Transfer donuts (on their parchment squares if using) into the basket, leaving space between them. Air fry 4–6 minutes, flipping halfway, until golden and cooked through.
Times vary by model; check early to avoid over-browning. Donut holes will cook faster, about 3–4 minutes total.
Finish: For cinnamon-sugar, mix 1/2 cup sugar with 1–2 teaspoons cinnamon. Brush warm donuts with a bit more melted butter and toss in the mixture.
For glaze, whisk 1 cup powdered sugar with 1–2 tablespoons milk and 1/2 teaspoon vanilla until smooth, then dip warm donuts and let set.