Brown the sausage in a skillet over medium-high heat for 5 to 6 minutes until no pink remains. Add onion and bell pepper, cook 3 to 4 more minutes until softened. Remove from heat.
Preheat oven to 175°C (350°F). Grease a 9x13-inch baking dish with butter.
Spread bread cubes evenly across the base of the dish. Scatter the sausage and vegetable mixture over the bread.
Whisk eggs, milk, salt, pepper, garlic powder, and smoked paprika together for 60 to 90 seconds until fully combined.
Pour the egg mixture evenly over the bread. Press bread down so it is fully submerged. Top with 1 cup of shredded cheddar.
Bake uncovered for 35 minutes. Add remaining 1/2 cup cheddar and bake 8 to 10 more minutes until the center is set and the edges are golden brown.
Rest for 10 minutes before cutting. Confirm the internal temperature at the center reads 74°C (165°F).