Sorry, now that you've given numbers to it, I realized my answer was wrong in your circumstance.
No, the $8000 of 2% expenses are NOT deductible.
Even though the Mortgage Interest and Real Estate Taxes are fully deductible, they still 'use up' the threshold for using deductions up to the income. In other words, because the Interest and Taxes were higher than the total income, nothing else is deductible.
