When are capital expenditures fully deductible?

Capital expenditures are fully deductible primarily in the context of rental properties when they improve the property, as reflected in the correct answer. Improvements to rental properties, such as adding new windows, installing a new roof, or renovating the kitchen, enhance the value or extend the useful life of the property. When these expenditures are made on rental properties, they can potentially be fully deducted in the year they are incurred if they meet specific criteria laid out by the IRS.

Renting properties implies that the costs associated with improving the property directly benefit the income-generating capability of that property. Generally, these expenses are added to the property's basis and then depreciated over time; however, some improvements can qualify for immediate expense deductions under specific provisions, such as Section 179 for certain types of property.

The other options do not provide a scenario where capital expenditures are fully deductible. For example, home ownership does not automatically qualify capital expenditures for full deductibility, nor does a decrease in home value qualify expenditures for deductibility. Similarly, while insurance coverage can assist with costs, the nature of capital expenditures in relation to taxation typically does not allow for full immediate deduction unless under the specific conditions as seen in rental property improvements.