jest.config.js

const nextEnv = require('@next/env')

const nextJest = require('next/jest')

const createJestConfig = nextJest({
  // Provide the path to your Next.js app to load next.config.js and .env files in your test environment
  dir: './'
})

// Add any custom config to be passed to Jest
const customJestConfig = {
  setupFilesAfterEnv: ['<rootDir>/setupTests.ts'],
  // if using TypeScript with a baseUrl set to the root directory then you need the below for alias' to work
  // moduleDirectories: ['node_modules', '<rootDir>/'],
  testEnvironment: 'jest-environment-jsdom',
  transform: {
    '^.+\\.tsx?$': 'ts-jest'
  },
  modulePaths: ['<rootDir>/src/']
}

const projectDir = process.cwd()
nextEnv.loadEnvConfig(projectDir)

// createJestConfig is exported this way to ensure that next/jest can load the Next.js config which is async
module.exports = createJestConfig(customJestConfig)