In a small saucepan, combine the water and sugar. Place over medium heat and bring to a gentle boil, stirring frequently, until the sugar fully dissolves. Remove from heat and allow to cool slightly.

While the sugar syrup is cooling, brew a strong batch of coffee using your preferred method. You want the coffee to be very concentrated in flavor.

Once the coffee is brewed, carefully combine it with the still-warm sugar syrup in a heatproof container or bowl. Stir until fully incorporated.

Transfer the coffee-sugar mixture to an airtight glass container or bottle. Allow it to cool completely to room temperature. This may take 1–2 hours.

Once cooled, add the alcohol and the vanilla extract. Secure the lid and gently shake or swirl to combine all the ingredients. The coffee liqueur now needs to rest and mellow for 40 days in a cool, dry, dark place like a pantry or cabinet. Gently agitate the container every few days by turning it over.

After 40 days, your coffee liqueur is ready! If desired, strain it through a cheesecloth or coffee filter to remove any sediment. To serve, pour the liqueur over ice or enjoy at room temperature.